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spk09: Thank you for standing by and welcome to the MaxSight second quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Sean Menarges, Investor Relations. Please go ahead.
spk02: Good afternoon, everyone. Thank you all for participating in today's conference call. On the call from MaxSight, we have Doug Dorfler, Chief Executive Officer, and Amanda Murphy, Chief Financial Officer. Earlier today, MaxSight released financial results for the second quarter ended June 30, 2021. A copy of the press release is available on the company's website. Before we begin, I need to read the following statement. Statements or comments made during this call may be forward-looking statements. within the meeting of federal securities laws. Any statements containing this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. Actual results may differ materially from these expressed or implied in the forward-looking statements due to a variety of factors which are discussed in detail in our SD filings. The company undertakes no obligation to publicly update any forward-looking statements, whether because of new information, future events, or otherwise. And with that, I will turn the call over to Doug.
spk05: Well, thank you, Sean, and good afternoon, everyone, and thanks for joining MaxSight's second quarter earnings call. I'll begin the call with a discussion about business and operational highlights during the quarter. Followed that, Amanda will give a detailed financial review, and then we'll open up the call for questions. I'd like to start off by saying that we're very excited to be speaking with you for the first time, following our IPO on that back on July 30th, after trading five years on the AIM London Stock Exchange, which we look forward to continuing. Through the U.S. offering, we raised approximately $200 million in gross proceeds, which followed a $55 million pipe earlier in 2021. And on behalf of the MaxA team, I would like to thank everyone who was involved with and supported us doing this. the IPO process. We are thankful for the hard work of our MaxSight dedicated team, our board of directors, our advisors, and for the support of our customers, partners, their patients, new stockholders, new shareholders, and the ongoing support of long-term shareholders, both in the UK and the US. With the NASDAQ IPO now complete, we're raising over $200 million and $73 million in cash and short-term investments on the balance sheet as of June 30th, 2021. We are better positioned than ever to become the premier cell engineering platform technology to support the development of advanced therapeutics. Now, Amanda will provide more details later in the call, but we realize very strong second quarter results as outlined in the press release published just a few minutes ago. This was driven by robust performance in our core enabling cell therapy engineering business in both cell therapy and drug discovery end markets. Total revenue was just over $7 million, representing growth close to 40% compared to the same period in 2020. Self therapy and drug discovery revenues, including both instruments and disposables, each grew approximately 60% versus the second quarter of 2020. We also recognized half a million dollars in pre-commercial milestone revenues from our SPL, Strategic Partnership Licensed Commercial Partners. As many of you know, investment into and innovation in next-generation self-therapy has been explosive. The next-generation self-therapy market has become quite an exciting opportunity from that site as it has become one of the fastest-growing and most promising treatment modalities to address a host of human diseases with high unmet medical needs. We're seeing incredible and ongoing success from our partners in their efforts to progress next-generation self-therapies into and through the clinic. And this is translated into positive revenue momentum in our enabling cell engineering business and burgeoning strategic partnership pipeline. MaxSight's proprietary flow electroporation platform provides both a scale-up and high performance needed to support the development and manufacture of complex next-generation engineered cell therapies in a CGMP-compliant manner. We believe MaxSight's value has been validated by the ongoing success we have had in signing usually beneficial long-term collaborative arrangements with a growing number of leading cell therapy developers across a broad range of applications. With the addition of myeloid therapeutics in the first quarter, cellularity in the second quarter, incentive biotechnology in the third quarter, we now have 14 of those agreements, or we refer to as strategic platform licenses or SPLs. In addition, our electroporation system has been used to manufacture drug products now for over 35 clinical trials. As of January 20th, 2021, we indicated that our SPLs had the potential to generate close to $1 billion in pre-commercial milestone revenues if all of our licensed programs were achieved regulatory approvals. Given our commitment to providing confidentiality to our partners, we expect to update key metrics around the SPL agreements more formally at the end of the fiscal year. including the potential pre-commercial milestone revenue, number of programs covered under the SBLs, and progression of those programs into the clinic. But with the three additional partners year-to-date, MaxSight has potential to realize and potential future downstream economics to continue to grow. As we have indicated, as these partners move closer to commercialization, one of our major initiatives is to position ourselves to support our customers through the regulatory process and into approval. which includes investing in our own manufacturing capability and automation. Following our NASDAQ IPO, we are committed to investing in the business to accelerate growth. We are expanding our commercial efforts and investing in research and development. More specifically, we're investing in research and development initiatives for the export portfolio, as well as developing new applications for our systems, including the commercialization of our largest scale PLX platform under the export umbrella. We're on track to release the improved VLX large-scale system by the end of 2021. And as a reminder, the VLX can process 10 times the capacity of the number of cells as our CGMP-compliant system, the GTX, used by cell therapy developers. And while a long-term initiative, we're excited about the opportunities for the VLX to enable the company to expand into larger-scale bioprocessing applications over time. We're also investing... meaningfully in the people. This year, we have made key hires and announced important internal promotions, including the promotion of Dr. Sarah Meeks, the Senior Vice President of Business Development, Dr. Jim Brady, the Senior Vice President of Technical Applications, and Steve Nardi, who joined us recently for Humanetics, the Senior Vice President of Manufacturing and Engineering Operations. We are also adding resources to our Alliance Management Team as a reflection of our increased interest on the part of Promotional Cell Therapy developers to work with us on a more strategic basis, and we're expanding our corporate development team, including the addition of Kevin Cutshall, Vice President of Strategy and Corporate Development, who recently joined us from Millipore Sigma. Finally, we continue to add to our sales, marketing, and field application team with opportunities we see to move into new applications and new geographies. Finally, we expanded our board of directors with the addition of Ms. Rekha Ambarajani, current Chief Executive Officer and Director of Jaya Acquisition Corp., and Dr. Yassir Al-Wakil, current Chief Financial Officer and Head of Corporate Development for Kronos Bio. Ms. Hemrajani and Dr. Al-Wakil bring valuable insights and perspective to our board, and we look forward to their contributions in the future. So in closing, we had a very strong first half of the year, highlighted by our IPL NASDAQ, the announcement of three SPLs, and important additions to our team and our board. We're very excited about our opportunity going forward, particularly in the self-therapy market, and believe we are making the right investments in executing on our plan to drive growth across all of our business. I will now turn the call over to Amanda to discuss our financial results. Amanda?
spk03: Thanks, Doug, and good afternoon, everyone. I think you should all have the press release at this point, but I'll just run through some high-level financials before we take Q&A. So as Doug mentioned, we had a strong second quarter, really driven by strength in our core business. We put up total revenue of $7.1 million, which was up close to 30, sorry, close to 40% this quarter. Again, strength was really driven by our underlying cell therapy business and a resurgence of growth in drug discovery. So this is our business excluding milestone payments associated with our partnerships. Cell therapy revenue was $4.8 million. That was up 59% over the second quarter of 2020. Drug discovery revenue of $1.8 million was up also 60% over Q2. So, again, a pretty strong quarter for the underlying business. Just as a quick background, I don't want to go into too much detail, but in case people are new to the story on the call, the way we define the end market, so to speak, is cell therapy is where our instruments are used to actually make the drugs. And in that case, we either sell the instrument or, in some cases, license the instrument. And then, of course, we have our proprietary disposables that we sell as well. And those are used predominantly to make ex vivo cell-based therapies preclinical and in the clinic. And we're seeing an expansion of use, as I'll talk about in a second, across many indications. Drug discovery, on the other hand, is where mostly large pharma uses our platform to make proteins more for biomanufacturing applications. using cells as factories, so to speak, to make transient proteins, as I mentioned, or other proteins like monoclonal antibodies. And in that market, we sell the drugs, sorry, we sell the instruments and then also recognize revenue from the proprietary disposables as well. So I guess not that the strength from this quarter really came from that core underlying business, We did get half a million of milestones associated with our strategic partnerships, as Doug mentioned, and I'll talk about that in a second as it relates to guidance for the year. In terms of the gross margin, we were at 89% this quarter versus 91% the quarter prior. We did receive a little more of milestone revenues last year vis-a-vis this quarter, so the The difference really was driven by the difference in milestones, and so underlying the gross margin was pretty flat, quarter over quarter. In terms of operating expenses, we reported total operating expenses of $10.7 million, which was up from $7.5 million. Most of that increase was really driven by headcount increases. As Doug mentioned, we are hiring quite a few people, increase in stock-based comp with the stock price increase that we've seen over the past year or so. And we did have some, and we are going to have some increased public company expenses, as you can imagine, with the NASDAQ listing, particularly in the back half of this year, most of which will be recurring. We are planning to make Investments in op expense, so including R&D, that was up quite a bit over last year, 60%. That's excluding karma. Again, we're adding quite a bit of headcount there, as you can imagine, with working on the VLX and some new products. Also, our sales and marketing expense was up about 60%. Again, this is really driven by our views that we see opportunities to accelerate organic growth. In part, some of that was also driven by stock-based comp increases. I also wanted to just give you a sense. I know we've talked about in the past adjusted EBITDA excluding karma. So just to give you an idea, our karma stem is pretty minimal this quarter, about $426,000 with minimal stock option expense. So just so that you can, from a modeling perspective, compare apples to apples. and we expect the CARMA-related spend from a clinical perspective to be pretty immaterial going forward. The wind down of the CARMA clinical expenses has been pretty, has sort of tracked along with our expectations and coming to a close in the first half of 2021. So just as Doug mentioned, we're coming into the end of 2021 and into 2022 with a very healthy balance sheet. We've got total cash, of just shy of 75 million cash and cash equivalents, and that does not include the just over 200 million that we raised as part of our recent NASDAQ offering. We wanted to give some guidance for 2021. Historically, we've talked about total revenue growth. We have tried to give the market a sense of our core business and how that's trending, both in self-therapy and drug discovery, as well as the milestones We are seeing quite a bit of strength in the core business, as I mentioned, in the first half, and that's continuing into the third quarter. Of course, with the caveat that COVID, and I'm sure many companies are making this caveat, that you never know how that's going to go. So this is guidance, sort of assuming standard state of affairs as it relates to COVID and But essentially, if you look at the growth we saw in the core business year to date, it would imply a sort of consensus remains the same for the back half growth of just shy of our historical 25% five-year CAGR. Based on the trajectory we're seeing, we think that ultimately we could see growth a touch higher than that. And again, we mentioned we had half a million of program-related revenue or milestone revenue in this quarter. We're pretty confident we could see another half a million in the second half. So if you kind of aggregate all that up, that would imply about $30 million approximately of total revenue for the year. And again, that would be kind of just ahead of our historical 25% CAGR run rate that we've been seeing in the past. In terms of the SPLs and the milestones, I know that a lot of folks have questions around that. It's very hard to pinpoint the timing, as you can imagine, given a lot of this is out of our control. We have a very strong SPL pipeline. Strongest, again, despite the fact that we have won three additional SPL agreements, including most recently SANA in the third quarter. very strong pipeline, very, very, uh, we're seeing a lot of depth in terms of applications, uh, new applications. So we're, so we're, we're, we're, we're confident that the next 12 to 18 months we could see meaningful revenue contribution from our, um, from our partners in terms of program economics. Um, as we said before, this year is fairly backend loaded. We have two customers that are moving into pivotal trials potentially, really hard to determine exactly when those might fall, whether it be this year or that year, next year. So we are more confident that 2022, it looks like, you know, it's shaping up to be one of the better years in terms of program economics, particularly with the pivotal trials. I think that's pretty much it from a guidance perspective, and I'll address questions later, but any time I'll turn it over to Doug just to wrap up before we move into Q&A.
spk05: Well, thanks, Amanda. And obviously, we remain very excited about the place in the industry with our technology and supporting the development of these really novel and exciting advanced cell-based therapeutics. Successfully completed our NASDAQ IPO. We're really pleased to announce the second quarter results and provide these this preliminary four-year guidance projections. And, you know, we believe we remain very well positioned and we're excited about the opportunities ahead. So let me stop here and turn it over to the moderator for any questions that you may have that Amanda and I can contribute to.
spk09: Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press the pound key. Please limit yourself to one question and one follow-up. please stand by while we compile the Q&A roster. Our first question comes from Julie Simmons with PanMirror Gordon. You may proceed with your question.
spk10: Hi. Congratulations on an excellent quarter. I was just wondering as far as historically you've talked about the number of programs you've got ongoing and the number of clinical programs you've got ongoing. I was wondering if you could give us some idea about how those numbers are progressing.
spk05: So, Julie, I mentioned in my part that we're going to be reporting against the SPLs in terms of the pre-promotion milestones, the numbers of programs, and we'll do that at the end of the fiscal year. That's what we'll update those. We have to be careful about confidentiality in each of the deals that we do, as you can well imagine.
spk10: Could you give us an idea of sort of the proportion that are in the clinic then, just sort of getting a feel for where that, or the proportion you have clinical relationships with just because that helps in terms of the modeling going forward.
spk05: Well, we announced in the S1 that we had 15%. This was at the S1, 15% of the 75 programs were currently in the clinic. That was, yeah, hopefully that'll help.
spk03: One of the things really to add, you know, we're obviously having, we're obviously cognizant of confidentiality as it relates to reporting, but we did also talk about the LOAs I think at the last one we said that we had 30 trials that had referenced our LOA, that that's actually increased to 35. We are seeing progression. And obviously adding to, I think the last time we updated numbers, we've added two SPLs since then. So all of those numbers are likely to be higher, but just out of respect for our customers, we're going to keep formally updating those numbers on an annual basis.
spk10: Lovely. Thank you.
spk09: Thank you. Our next question comes from Max Masucci with Cowan. You may proceed with your question.
spk07: Hi. Congrats on a strong first print as a NASDAQ listed company. To start, can we just walk through some of the assumptions in the $30 million plus revenue guide? Any swing factors on both the core razor blade business, whether it's you know, the manufacturing shortages we've seen for certain bioprocessing applications, just in terms of your visibility into the timing of some milestone triggering events.
spk03: Yeah, so I'll take that and maybe, you know, if Doug wants to add in. So, I think if you look at the consensus numbers for the core business for 2021, folks were assuming around 20% growth. If you were to just plug in the actuals that we reported this quarter, it'll get you closer to 25%, just shy of 25%. I think what we're seeing just with the trajectory so far is we expect to be a bit above that. So again, our five-year CAGR revenue rate, which doesn't really include milestones, has been around 25, so I would say we're a little bit ahead of that, which is great. And I think part of that is we have, like I said, a couple partners that are coming into pivotal trials, and so we're seeing some, obviously, less seasonality there in terms of preparing for the trials than we might normally see. and some recovery or resurgence of growth, so to speak, in drug discovery. We've launched a couple of new PAs, and we actually just launched another one recently that allowed multiple experiments at the same time, sort of lowering the transaction costs. And so I think that's been, again, a driver of the resurgence in growth. So we have pretty good visibility for the remainder of the year in some respects because we do have a number of platforms, as you know, that are leased. And so we know that revenue is, you know, we have pretty good visibility there into the licensed or leased piece of the instrumentation. Disposables, we have pretty good visibility there. The pull-through rates are pretty consistent in terms of what we've given recently as well. And so really it comes down to COVID being something that could affect the business like every other business. The team has done a great job of switching to virtual demos. But, you know, the reality is conferences are important in terms of lead generation. We're seeing some conferences switch to more in person, so that's encouraging. But, you know, we're being fairly cautious, I would say, in terms of the guidance based on, you know, what we're seeing in the strength in the business. But that's one variable that is hard to pin down. And then on the milestones, you know, It's really out of our control. We obviously have some visibility near term that may be proprietary to us based on our customers. And some of it we depend on public commentary, particularly the longer term piece. But it's really hard to, when you're depending on a partner and then the FDA to exactly pin down, you know, what when those things might fall. So as I was saying, we think 2022 looks pretty strong. It's not quite as back and loaded as this year was. We do have the pivotal trials that, you know, that are, again, hard to know if it's 2021 or 2022, but those would be net higher dollars in theory. So I don't know if that's helpful in terms of framing out potential areas of upside.
spk07: That's great. One more, just sticking on PAs, you know, nice to see the RUO, multi-wall processing assembly. I guess more broadly, can you just give us a sense for, you know, how the several recent consumables PA launches have played into, you know, any competitive dynamics that you face from other electroporation-based instruments in drug discovery?
spk05: Yeah, so, you know, the purpose of those instruments multi-well plates, low multi-well cuvettes are to put more transfections into a single disposables. So the result of that is the customer can do more at a lower per transfection cost. And we don't have to cannibalize kind of our pricing in order to do that. Just put extra wells into the disposable. And that's allowed us to go down into the lower cost per transfecting. Again, without playing in the more commodity market of both cell therapy and drug discovery. It's an ongoing process. I think we're quite good at voicing the customer, really understanding what the uses are. If we can come in with a very, very high performance product provided at a cost that is reasonable, we're seeing quite a bit of adoption in the platform now and across drug discovery and earlier cell therapy research.
spk07: Great. Thanks for taking the questions.
spk05: Of course.
spk09: Thank you. Our next question comes from Dan Arias with Spiegel. You may proceed with your question.
spk04: Good afternoon, guys. Thanks. Doug, I wanted to just start with sort of a topical industry question. The FDA panel that was held to discuss toxicity concerns related to viral delivery Is that figuring into conversations at all that you're having with customers? If it's too early to say, do you expect it to? I guess I'm just trying to understand whether safety is sort of something that's positioning your approach more favorably or whether that's just more industry debate that really isn't going to translate into a commercial impact. Dan, I don't know the answer to your question, frankly.
spk05: I mean, I think, you know, we don't lead with that. We don't go in trying to – compete against borrow vectors. I mean, I think that we've been talking about why companies or why developers are migrating more toward non-borrow. And safety is one issue, but it's also complexity and speed and cost. So we're still seeing combinations with non-borrow and borrow approach as well. So I think that there continue to be applications that make sense for borrow vectors, but I also think we're seeing a rather large shift toward using non-viral methods like CRISPR and other gene editing tools which allow people to gain the benefits of a non-viral system, but at the same time perhaps be able to move into more complex applications where safety is a bigger concern. Hopefully that answers your question.
spk04: Yep, it does. It is early there too, so I guess we'll just have to see. And then, Amanda, on the VLX system, you mentioned wrapping up by the end of this year. What should we expect when it comes to contributions from a commercialized product there? Is that something that could be material this year, sorry, in 2022, or is the rollout going to be phased in a way where we should really start dropping revenues into 2023?
spk03: Yeah, so I'll start with my CFO answer to that, and then I'll let Doug weigh in on that. more of the application potential that we see there. So essentially, the VLX is available now commercially. What we're doing is pulling it into the export umbrella, which we expect to have done by the end of the year, and that's really improving the industrial design, the user interface, that type of thing. Then we'll work on GMP compliance and building out what we think are interesting large-scale bioprocessing applications, and we have interest from customers now to do that, and we have. I would say it's early days there in terms of contribution to revenue. These are newer markets. Some of the customers use our lower-scale platforms for similar applications, but this is large-scale, as Doug mentioned, 10 times the volume. So this is really building out a whole new market, working with partners upstream and downstream. So I would really think about this as a two- to three-year revenue contribution opportunity, but also expanding or enabling us to expand beyond the cell therapy market, so to speak, in terms of at least making the therapeutics. So we're definitely looking forward to it and excited about it and investing in it, but definitely a two- to three-year time horizon. Doug, do you have anything to add there in terms of market opportunity?
spk05: Yeah, I think, as Amanda said, we've been receiving orders for it over the last several years. We don't actively market it. I don't think it was even on our website for quite some time, but some customers knew we had it and wanted to use it for a specific application. Frankly, Dan, we didn't feel comfortable marketing it in the way that we market our other products with the full application development and support. And we wanted to nail that all down. We wanted to make sure that the system was cloud capable and had all the right software and the right user interface before we really pushed it out as we had to market it as an expert product. And so now that we've got that, and we have a number of customers who are currently using it with some pretty interesting applications. But it's going to take some time. Hopefully it won't take as long as Amanda thinks, but it will be pretty hard. But I get her point. We have to be thoughtful about this and I think you can see MaxSight as being relatively conservative and kind of a plotting company when it comes to product introductions, and we're doing the same with the VLX. But it will be released at the end of the year, and we've got a handful of customers who are really looking forward to getting their hands on it.
spk04: I got you. Okay, thanks very much.
spk05: Thank you.
spk09: Thank you. Our next question comes from Matt LaRue with William Blair. You may proceed with your question.
spk08: Hi. Good afternoon. Just thinking about some of the investment, you know, coming from the recent raise, you talked about, you know, I think using some of that cash to expand sales and marketing, business development. You know, you talked, Doug, about some of the higher level leadership team you've added. Could you just maybe give us a sense for where you're you're planning to direct that investment, whether it's a number of, you know, Salesforce ads, field, you know, application scientists, and then, you know, where that's going to be targeted in terms of product development. I think, Amanda, you and Doug alluded to, you know, some interesting maybe product development going on as well. Just curious sort of where you're targeting the proceeds.
spk05: Yeah, so we really as a company don't believe that, You put up 50 sales people and it's going to result in a major increase in revenue. We just don't see that in this marketplace. I think we're highly attuned to what's going on in the marketplace. We're identifying new applications and KOLs, new geographies that open up. We have excellent sales people that stick with us because we treat them right. And we want to make sure that we're building out a sales team in the right way. Same with our FAS. We work hand in glove with our sales team. So You know, there's a structured way we think about this, and we add in people. We add in marketing people. And so, you know, I think you're going to see that team grow, you know, a step or two ahead of the revenue, but I think it's going to be a good way to really build out a sustainable business in the sales and marketing side. There's some very interesting applications on the R&D side that we're working in. I mean, once you have the platform established and, you know, it's invested and you have a system out there that works as well as ours does, now the next step is, okay, what else can this do? What new applications? And we're finding, as I'm sure you guys see, pretty much almost like every month there's a new cell type or a new approach or there's a new indication that's being developed. And we're seeing all those, and that requires us to get out there and solve those problems so that when those companies are looking to move a product even into the IND phase, we can help them do that. And so that's another major part of what we're trying to achieve. And obviously the VLX is going to take some additional investment, as will the need to do more in-house manufacturing automation to support the success of our partners. So it's a pretty broad remit in terms of where we see opportunities. It models what we said in the S1. We have no reason to suggest that that isn't the right direction. continues to be working by the team, and we'll be executing against that in the next several years.
spk08: Okay, that's great. I wanted to clarify the $500,000 of SP program-related revenue in the back half of the year. That's not the CTX-001 milestone. I guess I just wanted to confirm that, and then the second part was just you alluded to two pivotal trials upcoming, you know, what other sort of tracking your progress, what other milestones or items should we be looking for on the program side over the next year plus?
spk03: Yeah, so we're not speaking to specific milestones from specific programs. We're just confident that we We recorded half a million this quarter. We're confident in the half a million in the back half. We have, as you know, 14 partners now. The last number we've given was more than 75 programs, 15% in the clinic. We're not updating that like we said, but we did add additional partners. So You know, a lot of the earlier stage partners that we add typically, as we talked about, come in at close, somewhere around IND-enabling studies. So those milestones are, you know, potentially ones that may come through in the next year or so. It totally depends. It can be arranged. We do have the – actually, we have a few programs that could move to Pivotal in the next 12 to 18 months. TTX is 001 is one we've called out but in terms of a program we're supporting but there's many that we haven't I would just say that as we were trying to articulate in the call we do see a pretty strong year next year the pivotal milestones are typically larger and we are continuing to sign partners and so that builds the stack of milestones each period, a little hard to pinpoint exactly which quarter they may or may not fall. And I think next year is looking like it's going to be less back and loaded as this year was. But again, that can move around. So I think at least from a magnitude perspective, we see a fairly strong year this year, perhaps one of the strongest that we've reported. And I think those numbers are available. But it can move around, and so I hope that's helpful. We're just not going to speak to specific programs or partners at this point. We have, you know, confidentiality requirements and things like that. Okay. Thanks, Amanda.
spk08: Congrats on the course.
spk09: Thank you. Our next question comes from Mark Massaro with BTIG. You may proceed with your question.
spk01: Hey, guys. Congrats on a good quarter and on a successful NASDAQ IPO. You know, my first question is really on drug discovery. So, you know, you essentially beat our estimates on cell therapy, drug discovery, and SPLs, but wanted to drill down in drug discovery. You know, the growth rate of 60% sort of surprised to the upside. You know, I would have thought that that business would not be growing as quickly, you know, in part because cell therapy dramatically outperformed drug discovery last year. So can you just talk about that 60% growth rate? To what extent do you see better growth than you expected? As we look into the back half, you're almost done with Q3. Can you just talk about trends that maybe occurred after June and how you think that business can trend later this year?
spk05: Let me take a little piece of that first. The second quarter of 2020 was a tough quarter for a lot of companies, right? And the drug discovery business is typically, you're talking about big biotech and big pharma. And many of these companies pretty much reduced their operations rather considerably in the second quarter of 2020. What we're seeing in the field is people are wanting to get back to work, and they're coming back to work. And so I think a lot of it is, you know, companies are feeling much more comfortable about who they allow to work in and the facilities are being redesigned so people can work in a lab. So we're just seeing people coming back into the office and back into the laboratory. And I think that that general dynamic, I think, has helped us in terms of kind of rebounding from, you know, a difficult second quarter 2020. So I think that at the high level, that's the headline.
spk01: Got it. And I also, my second question, you know, we had an opportunity to speak with a number of your users. And, you know, what I found which was unique to MaxSight is just, you know, your high transaction efficiency relative to competitors, you know, the gentle nature of your platform and and not damaging cells, and a variety of cell types that your platform works on. I guess the last differentiator is just your FDA master file. I guess when we piece all of these together, can you just maybe give us a sense for competitive dynamics? Because in many respects, the four items I cited, you guys seem to have an advantage relative to competition. though some of your competitors actually have higher access to capital. So how should we think about the competitive environment now and how that might change over the next year?
spk05: Yeah, I don't think anything's changed since we last spoke or when we did the IPO. We just actually checked. Nothing's changed. You went through the list. It's the high efficiency. It's the computer control. It's the IP. It's the master file. It's a large scale. And We're top of class in all those, and no one can do any of them as well as we can. So they're going to have to go through a lot in order to be successful. Yeah, I'm not sure it's purely a capital deployment question. There's a lot of intellectual property. There's a lot of understanding. And you said it when you asked the question. If you look at the number of applications, the nuances between one application using one CAS versus another CAS, using a knockout versus a knock-in, using a stem cell that's derived from their precursor cell or a bone marrow stem cell. All those cells are different, and we understand that. And so when we go into a customer, we can design experiments to get them to where they need to be. So I think that the other thing that, isn't all that appreciative. It's focused. And I think that the company is really focused on this one thing, which is engineering these sales for therapeutic purposes. And I just don't think that there's anyone in the planet that has that kind of singular focus and understanding that we've been able to gain over the last 20 years. So, yeah, we're looking. Obviously, we keep our ear on the rail. You know, I think the thing that we we allow us to sleep at night is when we do these SPLs, and again, we're a premium price supplier. If there's somebody out there that's coming up against us, we're going to hear about it first from our customers in addition to the work we do competitively. So we're ready, and we feel very confident in our position in the marketplace right now given all the things we've invested and all the things that we can do that no one else can do.
spk01: Sounds good. Thanks very much. Thank you.
spk09: Thank you. And as a reminder, to ask a question, you'll need to press star 1 on your telephone. Our next question comes from Jacob Johnson with Stevens. You may proceed with your question.
spk06: Hey, thanks, and I'll add my congratulations on the next quarter. Maybe just, Amanda, first, just a quick modeling question. As we think about OPEX, on the R&D side, if we take the $3 million and change of R&D expenses and I think back out, 400-something odd of karma expenses this quarter. Is that a good baseline to assume R&D expenses grow off of? And then also just to clarify on the G&A side, public company costs are something that didn't really flow through this quarter but should flow through the back half of this year?
spk03: Yeah. So I guess, yeah, if you back out karma from the R&D line, that would give you a good base with the caveat that obviously we're As we've talked about investing, and I think we've given some commentary around R&D from a growth perspective, if you were to just look at the pure R&D, so to speak, that that would continue to grow faster than revenue. In terms of the public company costs, we had some in the first half, but, yeah, clearly those are definitely going to fall more in the back half. There's some non-recurring, but the majority is recurring revenue. things like insurance and legal fees that will continue and things like that. So that is going to be a step up as it relates to G&A spend in the back half. But over time, we haven't given long-term guidance, but what we've said, as I mentioned, is think about R&D growing faster than revenue, sales and marketing kind of in line to slightly above revenue, and G&A eventually will see some leverage there, obviously, without – not including that step up from public company expense. And then, you know, from a stock option perspective, we did see increases because of the stock price. So, you know, presumably that – well, I'm not going to make any comments there, but that did have – you know, that was a factor as well in the growth.
spk06: Got it. That's helpful. And then, Doug, maybe one question for you. As some of your customers move towards pivotals, and I probably begin thinking about commercial approval – Do you have a sense for what their manufacturing for those therapies will look like in terms of are those customers in general looking to have centralized manufacturing at a single site, or do you think your instruments would allow for manufacturing kind of at the point of care in a decentralized fashion?
spk05: Yeah, it's definitely either way. We're fine with it. We're scaling out the process. And just to remind you, we've announced over 400 systems in the field, So we know how to build these instruments so they operate consistently across locations, which is going to be incredibly important. That's one thing we didn't talk about in terms of what competition we have to do. We have to make systems that actually perform the same way in Tokyo as they perform in London, right? So that's another big part of what we're doing. And it really depends on the application. I think in some instances you're going to need close to patients. because you need to turn these cells around rather quickly. Some are going to be better manufactured in a more traditional biologic sense. We're prepared for either with our GTX or now our VLX, which is large scale. We're just going to follow what the customers want and enable them to do what they think is their best manufacturing strategy. We'll we'll adapt with them and give them the flexibility they need to be successfully launching their product, which I think is a great place to be in and one that we're going to work really hard to ensure that we understand and we can stay a step ahead or step with our partners.
spk06: Got it. Thanks for taking the question.
spk05: Thank you.
spk09: Thank you. And I'm not showing any further questions at this time. I would not like to turn the call back over to Doug Dorfler for any further remarks.
spk05: Well, thanks again for this call. This was an exciting time for Amanda and Sean and myself and the whole team as our first earnings call as a mass-neglected company. And it's good to do it on such a positive note. And we look forward to updating you in our Q3 progress on our next earnings call. And thank you for support. And everybody stay safe. And thank you again for your attention. or your supported back site.
spk09: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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