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spk01: Thank you for standing by and welcome to MaxEye's fourth quarter and full year 2021 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 will need to press star one on your telephone. Please be advised that today's call may be recorded. Should you require any further assistance, please press star zero. I would now like to hand the call over to Sean Menargus, Investor Relations. Please go ahead.
spk09: Thank you, Lateef. And good afternoon, everyone. Thank you all for participating in today's conference call. On the call for MaxSight, we have Doug Dorfler, Chief Executive Officer, and Amanda Murphy, Chief Financial Officer. Earlier today, MaxSight released financial results for the fourth quarter and full year ended December 31, 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 contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in any forward-looking statements due to a variety of factors which are discussed in our SEC 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.
spk03: Well, thank you, Sean, and good afternoon, everyone, and thank you for joining Maxite's fourth quarter and full year earnings call. I'll begin with a discussion of our business and operational highlights during the quarter, followed by a detailed financial review from Amanda. We will then open the call for questions. I am very excited with our team's performance in 2021. as we became a NASDAQ-listed company and continue to deliver on all of our financial and strategic objectives in our plan. MaxSight's platform remains the premier cell engineering technology, supporting the development of advanced cell therapeutics, and we continue to invest in our people and capabilities at a measured but healthy rate. Amanda will provide more details later in the call, but I note that we generated very strong fourth quarter and full year 2020 results, as outlined in the press release published earlier today, driven by robust performance in our core cell engineering business to both cell therapy and drug discovery customers. Fourth quarter revenues were $10.2 million, up 19% over the fourth quarter of 2020. We saw very strong growth in our core business with growth in revenue to customers in cell therapy of 43%, and drug discovery of 32%. For the full year of 2021, total revenue was $33.9 million, representing growth of 30% compared to 2020. Our core instruments and disposables in cell therapy and drug discovery grew 37% in the year, ahead of our historical five-year CAGR of approximately 25%. Our install base of instruments, both sold and leased, grew to over 500 by the end of 2021, compared to over 400 at the end of 2020. During the year, we also recognized $2.5 million in pre-commercial clinical milestone revenues from our strategic platform license or SPL commercial partners. As we have previously indicated, we take the confidentiality of our partnership agreements very seriously, so we'll be unable to answer any specific questions related to our SPL partners and their respective development programs. However, I can say that we are generally excited about the progress our partners have been making in the clinic over the past year. We continue to see additional SPL programs enter the clinic and have seen our existing clinical SPL portfolio progress in the later stages, including pivotal trials, suggesting we may see our first commercial product as early as 2023. We are extremely proud to be able to support our partners in their efforts to bring advanced therapeutics to patients. We have continued to see our partners invest in ex vivo cell therapies and expand the scope of their research, including new cell types, modalities, and indications, which, if successful, would be positive for Mexcite over the long term. In addition, our value continues to be further validated by our expanding customer base, including the ongoing success we have had in signing SPLs, with four new SPL agreements in 2021 and one agreement with Intima Biosciences signed in early 2022. We now have 16 SPL partners covering more than 95 programs, of which more than 15 percent have entered the clinic. This compares to our last update in January 2021 of 12 SPLs covering over 75 programs, of which more than 15 percent have entered the clinic. The total pre-commercial revenue potential from our total SPL programs is now greater than $1.2 billion, up from $950 million at the end of 2020. In the near term, we are optimistic about the potential for our SPL partners to generate meaningful revenue from both the research and production progress, as well as clinical milestones over the next 12 to 24 months. Our partners continue to achieve both scientific and clinical success, particularly in moving their next generation product candidates into pivotal trials. We also see the potential for several new IND filings by our existing SPL partners for novel ex vivo engineered cell therapies this year. Amanda will share more details around the progression of potential pre-commercial milestones that we expect to see over the next few years. With ongoing investment in the ex vivo engineered cell therapy space, we continue to see strengthening of our SPL pipeline across a variety of geographies, cell types, approaches, and indications, and expect additional SPL partnership announcements later this year. The economics of our recent SPL partnerships remain comparable to prior partnerships, representative of the value MaxSight brings to the relationships and the customer's commitment to a long-term partnership. Much of our focus in 2021 was investing in the business and refining our strategic plan. One of our investments has been in the VLX instrument, which we released under the expert brand in 2021. After alpha testing the product for several years with select customers and receiving valuable feedback, the VLX has entered the marketplace. And we believe we'll be a disruptive technology in large-scale bioprocessing applications. In 2022, we plan to work with several beta customers on the Expert VLX to build up applications data to support our expansion into the large-scale bioprocessing market, and we have been encouraged by the interest we have seen from customers participating in the VLX beta testing program. While the market expansion opportunity for the VLX in the large-scale bioprocessing applications will take time to evolve, we are encouraged by the progress to date and look forward to updating investors on the evolution of the VLX product roadmap over time. Finally, we launched three new processing assemblies or single-use disposables in 2021, which continued to strengthen the core business for the full year and particularly in the fourth quarter. We are also investing in manufacturing and process development as our partners move closer to the commercial launch of therapeutic products. We are on track with our plans to move into a new facility this year, which more than triples our manufacturing space and expands our process development capabilities. We also continue to further insource key elements of our manufacturing process, particularly around processing assemblies. Additionally, we are investing meaningfully in sales and marketing and made substantial progress in 2021, scaling our commercial organization, including our field scientist team. We are hiring at a strong pace and remain committed to maintaining MaxSight's strong culture of excellence. We are also excited to announce Jake Suman joined us earlier this month as MaxSight's Chief Scientific Officer. Jake brings deep experience in technology, applications, and platform assessments, the development of commercial partnerships, and leading collaborations to accelerate scientific and technical innovations. As we look more into 2022, we expect MaxLight to continue to grow its team across most areas of the organization, particularly in research development and sales and marketing. In closing, we have had an excellent 2021 as we continue to execute our financial and strategic goals. We are very excited about our opportunity going forward, particularly in the cell therapy market, and believe we are making the right investments to drive growth across the business. I will now turn the call over to Amanda to discuss our financial results. Amanda?
spk04: Thanks, Doug, and good afternoon, everyone. Focusing on the first quarter, as Doug mentioned, we're happy to report we realized record revenue and growth in our core business in the fourth quarter. Sales to cell therapy customers in our core business grew a robust 43% over the same quarter last year, while sales to drug discovery customers also grew a strong 32%. We saw broad growth across the business, which strengthened instrument sales to both cell therapy and drug discovery customers, as well as processing assemblies, in part aided by the new processing assembly launches that Doug had mentioned earlier. We did not recognize any SPL program-related revenue in the fourth quarter of 2021, although we recognized $2.5 million for the full year of 2021. We do appreciate, however, the need to provide more transparency on our program economics near-term and long-term, so I will provide more details on that front a bit later in the call. Moving down the P&L and looking at the fourth quarter, gross margin was 88% in the quarter versus 89% over the quarter prior. The decrease in gross margin was driven by the lower SPL program-related revenues. Excluding those dynamics, gross margin was relatively unchanged. Total operating expenses for the fourth quarter of 2021 were $14 million compared to $10 million in the fourth quarter of 2020. As Doug mentioned, our current strategy is to continue to make meaningful investments in R&D and sales and marketing investments to take advantage of the many opportunities we see to accelerate organic growth over the next few years. The increase year-over-year was primarily driven by increased headcount across all areas of our business, as well as an increase in stock-based compensation, as we outlined in the press release. Ultimately, we came into 2022 with a very healthy balance sheet with total cash and cash equivalents and short-term investments of $255 million as of the end of the fourth quarter and no debt. Moving to our outlooks, For 2022, as we outlined in our press release, we expect revenue from our core business, which includes sales of instruments and disposables to cell therapy and drug discovery customers, as well as lease revenue to our cell therapy customers, to grow between 22% and 25% over the prior year. As Doug mentioned, we remain optimistic about the prospects for our business and believe our STL partners are well capitalized in 2022 and into 2023. In addition, the business momentum we saw in 2021 has continued into the first quarter of 2022. That said, we believe we've captured a more prudent outlook in our guidance given the current broader macro environment and ongoing fluctuating COVID dynamics. Turning to our SPL program economics, as we've discussed in our previous call and also in discussions with investors and analysts, the timing of our SPL revenue recognition is predicated on our customers' clinical and regulatory process and FDA decision-making. which obviously we have limited visibility into. That said, we do appreciate the need to provide some forward visibility and transparency externally. Over the past year, we've seen strong progression in our customer pipeline and an increasing number of potential milestones added into the milestone stack as we add more SQL partners. We expect the timing of milestone revenues to continue to be lumpy over the near-term quarter to quarter as our SPL pipeline continues to mature. We do, however, based on current information, expect 2022 SPL milestone revenue of approximately $4 million. In addition, to help provide some context on the SPL milestone revenue opportunity for Maxit over the next couple of years, we've added an additional slide to our corporate deck that we wanted to call your attention to, which can be found on our website, at www.maxsite.com. This new slide, number 14, attempts to provide a snapshot of how milestones have trended over the past five years in terms of number and phase, and how we expect them to trend through 2024. Over the past five years, we've received approximately 20 milestones, which have been comprised of early-stage milestones, such as IND, filing, and phase one, as you would expect. Looking forward, however, based on the information we currently have, we see the total potential of approximately 50 milestones pre-commercial, which is almost three times as much as we had over the past five years. These milestones are also increasingly related to later stage development. We estimate about a quarter of those 50 are pivotal or later, and 40% are phase one. These numbers are based on our current SPL partnership, so don't include any future SPL agreements you may sign. As Doug mentioned, there are several opportunities in front of MaxSight, and we continue to plan on making necessary investments in R&D and sales and marketing to capitalize on those opportunities. So we expect those investments to increase throughout the year in 2022 as we see the four-year impact of headcount added in 21 and continue to invest in those areas in 22. Now I'll turn it back over to Doug.
spk03: Thanks, Amanda. In summary, we remain excited about the opportunity to lead the industry forward as the premier cell engineering platform technology supporting the development of advanced cell-based therapeutics. We were pleased to report strong fourth quarter and four-year results, as well as set our outlook for 2022. MaxSight remains well positioned for growth, and we are excited about the opportunities ahead. I want to take this special opportunity to recognize our entire global team and board for their full commitment to providing unparalleled technology, products, and support to bring the new generation of cell-based products to patients. providing them additional treatment options. With that, Lateef, I'd like to open this up for Q&A.
spk01: Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Once again, that's star 1 on your touchtone telephone to ask a question. Please stand by while we compile the Q&A roster. Our first question comes from Jacob Johnson of Stevens. Your line is open.
spk02: Hey, good evening or afternoon. Maybe, Amanda, following up on the comment you just made about the progression of SPLs as customers ramp, and thanks for the new slide, I guess thinking about it from the core business perspective, can you just frame up what – the scale up for these customers looks like in terms of the number of instruments and the amount of consumables, uh, uh, somebody moving into pivotal kind of needs and what that looks like, uh, potentially as they move into commercialization, just kind of what that, that scale up, uh, and kind of the core business looks like from those customers.
spk04: Yeah, I'll take a first stab at that and then, you know, turn it over to Doug for more comments. I mean, we haven't really given that level of context, um, at this point, and obviously it's variable depending on the approach and indication and all that type of thing. What we have said, though, is that we've consistently seen the same trend, meaning from a preclinical perspective, we tend to see a lot of usage with our lower scale processing assemblies, you know, because obviously they're working on optimizing and things like that. And then as you work through the clinical trial process, uh, you tend to see a bit of a dip from a unit perspective because typically the phase one, um, uh, trials are smaller again, depending on the indication, it can be variable there. Uh, and then, you know, ramp over time as, as the customers move through, um, through the regulatory, you know, um, process into Pivotal and beyond. So we've kind of laid that out, but that's pretty much what we've given at this point. Doug, I don't know if you have anything else to add there.
spk03: Yeah, I think there's an algorithm here we're trying to build, and it's still low numbers, Jacob, but certainly Aldo versus Aldo, and if it's Aldo or both of them, it's going to be how many manufacturing sites they have, and that would also be driven by how many locations they're running clinical trials in. Some of our customers' partners use ballroom-type manufacturing processes where others use manufacturing trains. We're seeing also as customers get more comfortable with our technology and they put products into the clinic, they add more preclinical and non-clinical programs into their own. So we end up with additional product sales for that purpose. So I don't think there's any real clear algorithm we've been able to build. I think we're still building it. But obviously they do increase over the course of the relationship with the partner.
spk02: Thanks for that helpful context. And then on the kind of beta testing with BLX, You know, I think there's a wide range of use cases for that instrument, from maps to viral vectors and maybe most interesting, the allogeneic side of things. Can you just talk about, you know, in those kind of areas where you're seeing the most initial interest, you know, understanding that it's pretty early and aims for VLX?
spk03: Yeah, I think it is still pretty early. I think that the one that we're focused on initially would be the map production because I think that there's a, immediate need in the marketplace for that abroad. I think it's a broad TAM expansion opportunity for the company. And we do quite a bit of that in smaller scale with our STX today. So it's a natural progression for our company, for our partners to want to scale the STX up the larger volumes. I think there's still work that has to be done on the VLX applications. The viral vectors are still biology. I mean, one of the reasons we brought, when Jake joined us was to help with, you know, kind of across the board and really figure out what sort of use cases we had to ensure we had in place in order to commercialize that in the proper way, the way that NiteSite likes to do that. And as I think I mentioned in prior calls, there's quite a bit of work in making sure that this technology, although it's very disruptive, it does require significant pre- and post-electroperation engineering work, the process engineering work that has to be done. And that's one of the reasons that we're investing in process development as a company and moving into a new facility so that we can better mirror what our beta testers are using the technology for.
spk02: Got it. Thanks for taking the questions. I'll leave it there.
spk01: Thank you. Thank you. Our next question comes from Julie Simmons of Panmure. Your line is open. Thank you very much.
spk06: Great for the results, guys. Stephanie, just a question following up on the VLX as to whether you have any idea as to what the business model for that is going to look like yet. Is this going to be another licensing model, or is it going to be an outright sale and it's a consumable type of model?
spk03: Hi, Julie. So part of the beta testing is to really spend the time testing that model. I think it will vary based on the application and vary based on the value we bring to the customer. I think it's fair to say that our mindset around this has been to work closely with partners and understand where the pain points are and work to solving those and then sharing in that upside with them as we do that. So I think that same mindset will be valuable for the company and our partners, frankly, as they see the long-term opportunities for this technology.
spk06: Excellent. Thank you. And just on the expenses side, clearly we're going to step up since your NASDAQ IPO as expected. And how much more on a quarterly basis do we expect that to go up? I mean, can we use Q4 as a sort of indication as to what it's like going forward? Or is the move into the new site and the continued recruitment going to mean that we're going to see continual step up going into 2022 through 2022?
spk04: Yeah, I'll take a first crack at that. I mean, I think... As we mentioned, we see quite a bit of opportunity from an investment perspective in terms of driving further growth in cell therapy. And so we're investing quite a bit in headcount, particularly in R&D and sales and marketing. So I would expect that to increase just because obviously we have hired quite a few people, and then you'll see that full year, as I was saying, the full year – impact of that in 2022. And then, in addition, you know, we're continuously hiring as well. So, you know, we're not giving specific guidance, so to speak, but that's how I would think about it in terms of investment.
spk06: Lovely. Thank you very much. That'll do for the moment.
spk01: Thank you. Thank you. Our next question comes from Paul Coudon of Numis, your line is open. Paul, please make sure your line isn't muted. And if you're in a speakerphone, lift your handset.
spk07: Oh, hi, Doug and Amanda. Sorry, is that working now? Yes, sir. Yes. Okay, very good. Yeah, good to hear from you both, and congratulations on 2021. I was just hoping for a little bit more color on sort of growth within the cell therapy in particular any major differences between Android Discovery actually between capital sales and the processing assemblies and the leases and with over 500 instruments in the installed base now are you finding customers are managing and happy with the machines they've got or are you having to put a little bit more support alongside those to keep them running smoothly I'll answer the last part of that Paul these instruments are built
spk03: The last, and there's very little work that has to be done to have them operational, so we really don't have that as an issue. We don't have to really invest much to do that. We can't give specifics, but I will say that the business is performing just really well across the board. Leases, product sales, disposables, and every aspect of business is really good. not been particularly strong.
spk07: Okay, superb. And in terms of applications, we've seen the importance of your technology for cell therapy. We've spoken about viral vectors and potentially biomanufacturing in the past. I think this year has seen quite, well, the last two years, So virology has become quite lucrative. There's pseudovirus kind of assays sort of happening within drug discovery. So I'm just wondering whether there are sort of other kind of avenues where you're finding sort of early interest within the expert system that are emerging that could complement where it's historically been very strong.
spk03: Well, I think in two areas I can comment on directly. One is that there's a lot of work that's being done on identifying drugs new pathways and cells, right, for engineering and new cell types. We did the intima deal, which is a TIL cell, and we're knocking down the cis pathway, which is apparently an important one. So there's a lot of basic research, I think, that's being done or translational research that's being done in the cell therapy space. So we're seeing a lot of interest in that. In the drug discovery side, not bioprocessing, but small molecule drug discovery, there's still quite a bit of early stage work that's being done to identify new ion channels, new ways of creating iPSC cell lines for the identification and screening of targets, for instance. So that's an area that we keep an active part on. So it's across the board. What we want to be careful of, as I think we talked about before, We don't want to get pulled into the academic research part of the life sciences business. We really want to focus our attention on more business-based, commercial-directed and clinical-directed and eventually commercially-directed therapeutic development.
spk07: Okay, excellent. And just finally, on the I think I've got slide 12 of the corporate presentation, the example SPL NPV, you've got six programs per agreement launching one year, two failing preclinicals, four interclinical, one commercial. Okay, so that would be sort of a typical example within the cell therapy applications that you're in and the weighted average MPV of $85 million. I mean, that would be sort of a standard calculation that you've run?
spk04: So, Paul, let me take a first step. So that was part of, that actually was also in the S1, and what we were trying to really do there is not give a specific, or rather give an example SPL. So, of course, each individual partnership is different and there's different number of programs. So we were trying to give some perspective on if you apply some level of clinical risk to an SPL, which roughly is average of six programs per partner, but obviously that in reality varies. And then just thinking through, assuming one gets to commercial and then the others drop out, you can obviously apply... whatever clinical risk you feel comfortable with. But we were just trying to provide an example of what each partnership could be worth in terms of pre-commercial milestones, which are actually pretty consistent across the partnerships, given they're more related to regulatory timing and events versus the commercial side, which I think what you can see from there is that it could be meaningfully higher, but obviously more variable because you're then talking about indications and that type of thing. We did only use the first five years of theoretical commercial revenue in that analysis for that perspective, but it was just really to give an example of the value potential from a revenue perspective.
spk07: Very useful.
spk01: Thank you. Thank you. Our next question comes from Dan Arias of Stiefel. Your line is open.
spk05: Hi, guys. Thank you for the questions. Doug or Amanda, I want to just ask about drug discovery revenues. If I look back the last couple of years, you've been in a pretty tight $7 to $7.5 million range for a while, but you did step up this year to closer to $8 or to over $8. And I remember you talking about the VLX system as having a pretty good opportunity in drug discovery. In fact, I think you just mentioned it on this call. So as we think about that, I mean, is it likely that with the step up that we're seeing here and with VLX having a nice opportunity in that portion that we could start to see the drug discovery revenue kind of consistently tick higher in the $8 million to $9 million range going forward? Maybe not this year as much, but 2023?
spk03: I'll leave Amanda to talk about the specific numbers. But, you know, as we've been talking for the last couple of years, we've recognized that there's a couple of issues going on. One is that the drug discovery market is a huge opportunity for us. And we've been able to show, I think, more value to our customers on the cell therapy side. So I think that there's been more attention being paid to the cell therapy group. We've also had the opportunity, since we had more capital, to really start to expand out our commercial team. And part of that expansion is providing us the ability to go a bit deeper into these drug discovery and bioprocessing partners. I think that that's what you're seeing as a result of that concerted effort to really rebuild that business from where it was several years ago. So I'm not sure we're going to land from a numbers perspective, but You know, the folks we're bringing in have most recently have come out of that world as well. So we're trying to really balance the cell therapy opportunity with the bioprocessing opportunity and the drug discovery opportunity. Hopefully that helps.
spk04: Yeah, I just have a couple of things. And so as you mentioned, we introduced some new processing assemblies, which I think benefited the drug discovery community. part of the business in terms of multi-well PAs that sort of help lower the per-transaction cost. I think that's been a driver. From a VLX perspective, we're, as you mentioned, seeing very strong interest from a beta customer perspective. But again, this is a new market. for us in terms of not necessarily new applications as we do those with some of them with pharma customers now, but certainly need to build up the use cases and the supporting data for those over time. So I think what we've been saying and continue to say is that we're, you know, very excited about the market opportunity there as I've talked about, but again, this is kind of a longer term, you know, two to three year type revenue.
spk05: driver for the company okay i mean i don't want to i don't mean to be overly picky on the numbers per se because it's a million million or so here but i i guess the the essence of the question was just do you think that drug discovery the trajectory for drug discovery can start to tick up a little bit as you work through some of your new products and as you you know to doug's point i'm just the opportunity set in front of it um such that in a couple years maybe you do find that that's a double digit million number you don't have to endorse the number i guess i'm just I'm just thinking about whether I should start to be a little bit more incrementally positive on where that line goes.
spk04: Okay, Megan, we're not giving specific guidance by market, but I think we definitely are encouraged by what we have seen to date in terms of the adoption of some of these new PAs, as we mentioned. There is some sort of Yeah, obviously from the growth side of it, there's a comparison dynamic. But I think, you know, obviously the run rate now that we have is not with the VLX in the large-scale market. So that's sort of our current business. And, you know, the team continues to look at new PAs that, can help, you know, continue to meet customer needs. And I think we saw success there on both sides of the, of the equation this, this, this year and this quarter. So especially this quarter. So, um, and I'll just kind of leave it at that. Yeah. Okay.
spk03: But just the only thing I would add to that, Dan, is that, you know, we, I think we mentioned that we did see some, um, you know, some compression on the drug discovery side because of the pandemic and the inability to really get into some of these bigger companies that they were, They weren't operating at full capacity, and I think they're seeing now the big pharma companies, the big biotech companies are coming back in a big way, and I think that's going to be helpful for that segment.
spk05: Yep, that is definitely good to hear. Okay. And then, Amanda, on the gross margin line, is there anything you would call out from a cadence perspective over the course of the year, just given the impact that milestones and royalties have there?
spk04: Okay. Yeah, I think, look, outside of the milestone dynamics, it's pretty consistent. There may be some puts and takes there, but it's been fairly consistent over the past several years. The quarterly cadence of the milestones is really hard to pin down, as you can imagine, just given it's sort of outside our control, right? It's our customers' regulatory timelines, and FCA decision-making, which is pretty hard for us to pin down outside of that. I think, you know, we expect risk margin to be fairly consistent. I don't know, Doug, if you have anything to add there. Just, you know, I'll have equal with our current business anyways.
spk03: No, I mean, the band is pretty tight. If you look at it, it's one or two points, right? So I think Amanda hit it. I think we're comfortable with kind of that level of gross margins in the business. And as I also mentioned, I think the milestones are going to help push that gross margin number up a little bit. And as we become more basic in manufacturing, certainly in the earlier days when we're manufacturing more SKUs, you're going to see some erosion, a little bit of erosion in the gross margin, but I think they're going to offset each other.
spk05: Okay. Very good. Thank you, guys.
spk01: Thank you. Our next question comes from Matt LaRue of William Blair. Please go ahead.
spk10: Hi, good afternoon. In terms of the future market opportunity, I think at the time of the NASDAQ IPO, you characterized an SPL pipeline of around 50, and I think growing to somewhere like 130 or 40 over the next five years. Just curious if there's been any change to those thoughts. And then I guess part two would be, just thoughts around your ability to participate in those opportunities, so more of a competitive question. I know there's been a couple of recent competitor product announcements, and maybe just get your take on that.
spk04: Well, let me just – I'll take the first part in terms of the market and how we calculated that and then turn it over to Doug. So that slide's in the deck, and essentially – it was sort of a point in time analysis where we looked at the pipeline and we said, all right, obviously we don't, from an SGL perspective, we partner with companies. So we looked at the pipeline that was in our current market where we were seeing a lot of success. So IO and inherited disorders. And we said, all right, how many of those should be SGL opportunities? And that's where we came up with the 50. We have seen incremental growth interest outside of those markets as our indication. So autoimmune as an example. Um, and then when we factored in the forward, you know, five year growth, we made an estimate around, um, the impact of current investment and adoption of non-viral technology. So it was really, that was really our take at the time. I think, um, as the, we're continuously seeing increased complexity in the market in terms of cell type and engineering or how much engineering of the cells companies are doing. So that would all sort of point to increased adoption of other non-viral or non-viral delivery technologies. I think the other thing I would say there is that we're also seeing interest outside of kind of the U.S. and Europe as well. And so that wasn't factored into that analysis. So we haven't updated that, honestly, since the IPO, but we're just trying to give a perspective. So I would say, if anything, the market's sort of larger at this point.
spk03: Doug, do you want to take the... Yeah, let me comment on that in the second part of the question, Matt. So first off, with strong cell therapy growth, if we're selling or leasing instruments into non-SPL customers, that's a good indication of the strengthening of the pipeline of potential SPL customers. Because anyone who's acquiring the technology or licensing technology, they're licensing it for all the attributes that we have and the benefits we provide to our customers. So that's using the baseball analogy because hopefully we'll start seeing some baseball again That's the on-deck circle for us. So we want to really make sure we've got a lot of people in the pipeline, a lot of companies in the on-deck circle. So when they come up for the SPL deals, we've got them captured. And so we just continue to focus our attention on capturing these companies at the early stage. In terms of competition, there's a lot of noise out there. But I think that we're not seeing that having an impact on our close rate, frankly. We've often talked about kind of the four pillars of our offering, which is high performance of the system in terms of efficiencies, the flexibility in terms of being able to use a single buffer, for instance, and preloaded library-validated cell-specific products. I have to mention that that's becoming a bigger and bigger issue with CMC issues around FDA. The scalability is still key, and we stand alone in that aspect. And with VLX, we've actually just extended the game by basically 10 times the STX, the GTX. And then the quality. It's the CGMP. It's single-use disposables. It's the master file. And all four of those things, we excel in each of those four, and there's no one out there that can touch us in any of those four. So we're not going to be complacent. continue to push the envelope, but we're not seeing an impact on the business.
spk10: Okay, that's great. And then, you know, another year for strong instrument placements. We'd just be curious if you can give us any sort of color around instrument placement location in terms of cell therapy for drug discovery, or how many of those placements were driven by current customers scaling up their efforts versus new customers adopting the technology?
spk03: Yeah, I don't think we can give any guidance on that. I do, though, think that we mentioned in the earnings call earlier that we're seeing an uptake in other geographies, which I think is quite important for the company and I think quite important for the whole industry. So we're seeing the fruits of Our labor in setting up beachheads in Asian countries and throughout Europe and the U.S. is starting to pay dividends. It takes time for a small company, but I think you're starting to see kind of a flywheel effect as we build out our sales and marketing team, we build out our field application scientists. We're able to uniquely solve customer problems in locations that we couldn't really touch before we had the capability the capability and capacity and capital to do so. And now we can do that. So I think we're going to see an increase across the board in the performance of the business.
spk10: Okay, thanks. And then the last one for me in terms of bringing more manufacturing in-house, I guess, could you remind us, is the intention that at the conclusion all PA assembly will be done internally and how much at that point would would still need to be in source in terms of components versus largely assembled internally?
spk03: Well, I think it's always wise to keep a balance of external and internal manufacturing. I think it's always prudent from a manufacturing perspective to have multiple sites, at least be able to rely on multiple sites if you run into an issue with either capacity or something were to happen at the site, right? So I don't see us putting all of our eggs in one basket. we're not going to be basic in injection molding, for instance. We think that that's better left for companies that are out there doing that on a daily basis. But what we're really focused on is making sure we have better control over all the components and better control over the assembly and final preparation of the products for our customers. Because what we want to ensure, there's obviously some commonality amongst these different disposables, and we want to control them and we'll be able to control better the mix of finished goods based on the ability to leverage certain individual components. And so I think it's going to help us to build inventories, become more flexible. And as our customers move toward commercialization, I think it's going to be even more important that we've got excess capacity in our manufacturing capabilities to support them. As you know, in the therapeutics business, there can be, rather significant variations in terms of demand for these products, and we want to make sure that we're able to support that.
spk10: Great. Thanks, Doug.
spk01: Thanks, Matt. Thank you. Our next question comes from Max Masucci of Cohen & Company. Your question, please.
spk11: Thanks for taking the questions. Congrats on the continued momentum in the business. First one, FDA released some new draft CAR-T product development guidance last week. It covers a range of topics, the ideal time to implement manufacturing changes, call to action for better monitoring of critical quality attributes, but it's a comprehensive draft guidance, but from a bird's eye view, Doug, it would be great to hear your perspective if you've had a chance to review it just in the context of your SPL business and your non-SPL core businesses.
spk03: Well, sure. A lot of that guidance is focused on CMC and manufacturing control, right? And so there's also been some comments about the ability to use information around certain manufacturing processes that could be eventually used for cross-referencing for a BLA, for instance. So I think that ports favorably for MaxSight. I think there's also, I think... more interest in ensuring that the consistency of each of these processes is important and that, again, you can manufacture the same product on the same instrument from one run to another and then from one instrument to another instrument and from one location to another location. And I think we've been, you know, working for the last couple decades to make sure that we can do that. And so our sense is that we've achieved This is a welcome validation of what we've been really focusing our attention on over the last at least decade to ensure that we can provide our partners with what they need to move all the way into the clinic and all the way through the clinic with our master file. I think we mentioned we now have over 40 clinical trials associated with it. So we feel like we're in the right, we're doing the right stuff We think also that guidance provides us with additional opportunities to build a business because what we've learned, I think we've learned with our partners that consistency and product characterization are important. And I think our company is really set up to look at new potential technologies and new potential solutions to these problems. As partners move closer to commercialization, and again, we're working with as you as you as you've recognized with some of the leaders in the commercialization of cell therapy. So I think we've got a kind of an inside view of what's going to be important. So our sense is that guidance was was was a good validation. You know, there's there's a there's a really important interface between industry and FDA, whether that be through bio and or through arm or ICT and MaxSight is actively involved in all those organizations to ensure that we can help to provide the standardization for the industry. So that's an investment that we quietly make and spend time ensuring that the industry is well supported by technology providers like MaxSight.
spk11: That's great. Just a little follow-up there. It seems like the FDA is, you know, nudging CAR-T developers to, you know, at least attempt to lock down manufacturing methods a bit earlier in development. So I'm just curious if that would be, you know, that nudge or that urge from the FDA, you know, would be, you know, could spur a tailwind for, you know, some GMP-grade closed platforms or GMP-grade PAs in the core razor-blazer blade? business and, you know, the PA portfolio is, you know, it's continuing to expand and round out. And you do have, you know, I believe the three processing assemblies are being sold to both research and GMP customers. So it would be great to hear if you're seeing that, you know, shift to GMP products occurring, you know, earlier in the process and if that could be a tailwind.
spk03: Yeah, I think, you know, our view with our customers have been get involved with us early because we can we can provide you the same platform, the same product, the same electroporation settings, all the way through for IND enabling studies, all the way through scalability, all the way through to commercialization. And so I think that does play well. I think we've been at the, let's say the forefront, but I think we've recognized the need and the opportunity. I think we've seized it. So I think we're in pretty good shape.
spk11: Great. Thanks for taking the questions. Appreciate it.
spk01: Thanks, Max. Thank you. Once again, to ask a question, please press star 1 on your touchtone telephone. Again, that's star 1 on your touchtone telephone to ask a question. Our next question comes from the line of Mark Massaro of BTIG. Please go ahead.
spk08: Hey, guys. Thanks for the question, and congrats on the strong end to the year. I guess, you know, your business is nice and stable. You know, you signed four SPLs in 2021, one here in 2022. I think at the time of the IPO, you talked about a goal of signing three or four SPLs per year. Are you still confident you can sign three or four this year? And I guess what I'm really trying to get at is just your comfort level in, you know, your funnel near term.
spk03: Well, the funnel has never been stronger. It continues to strengthen. I think that's evidenced by, you know, the strong quarterly growth. quarter-over-quarter growth in cell therapy. Again, that builds pipeline for the SPLs. We don't control the SPLs, obviously. That's something that we have to do with a partnership. But we see no reason why the dynamics are changing in a negative way for us. I don't think we've provided any further guidance on what 22 will bring, although I think our track record's been pretty consistent And I think we've been able to sign three, four, or five a year over the last several years, and that's something that we continue to work toward.
spk08: Okay, great. Yeah, go ahead a minute.
spk04: I was just going to add just one quick comment there. Obviously, these are negotiations and contracts that are long-term, of course, so it's sort of hard, you know, again, you're putting, not you, but putting a December to a December timeframe is difficult, right? But to Doug's point, we have an ever increasing pipeline, um, which I think has been driven by a lot of things, you know, especially just the, the clinical support that we continue to build with the master file and that type of thing. Um, so just to, to reiterate that, uh, that point, um, And we can go through the numbers, you know, offline in terms of historical signings. But, again, we still have the same comment around the pipeline being, you know, really strong and building.
spk08: Okay. Yeah, that's encouraging. I guess, you know, as analysts, we see that there's been a little bit of a shift in capital market dynamics in the last several months. You know, some of your customers, admittedly, are startups. So I would just be curious to ask about, you know, access to cash, access to capital, and whether or not you're seeing any softer demand from some of your customers as it relates to, you know, maybe some customers trying to preserve capital.
spk03: Well, I think, you know, what they're working on with us is probably central to what their business model is all about. Right. I mean, right. So if they're working on a product that's in going toward a pivotal, um, they're probably not going to be backing away from that from a, from an investment perspective. Um, so we're, you know, we obviously track the cash that our partners have. But we're not seeing any softening of demand based on their cash needs or their cash end dates. We do pay attention to that, of course.
spk04: And one other thing, just to kind of wrap up both of your questions, we're also not seeing any change in the economics as it relates to the partnerships. So, as you said, they've been fairly consistent and in terms of the pre-commercial sales attainment structure. So just to kind of tie both your questions together, we're not seeing any change there either.
spk08: Okay, that's great. And then if I can ask one last one. You've talked about the VLX really being additive into new indications like monoclonal antibodies and viral vector production. So I think you've addressed this before, but is it safe to say that you're not expecting – customers to return ATX, STX, GTX in exchange for the VLX. So any comments about that? And I know it's early days now, but I'm curious if you could just speak to that over the next year or two.
spk03: I don't see this as cannibalizing any of those products. In fact, I think it's just going to do the opposite. When you talk to these customers in bioprocessing, the the VLX is actually a scaling down of their process to some extent. They're working in thousands, 2,000 little bioreactors. They're scaling down. And as they scale down, they'll want to have even more flexibility at the lower end to do their design and experiment. So my optimistic view, my pragmatic optimistic view is we're going to not see cannibalization. We're actually going to see more opportunities because now these companies will be able to convince the process development folks on the larger scale side that they can move from the STX to the VLX, and that will, I think, open up, frankly, new opportunities for the STX and the GTX in these companies because there will be more products that they can develop knowing now that they can scale up even further with the VLX, if that makes sense.
spk08: Yep, that makes perfect sense. All right, thanks, guys.
spk03: Thank you all, and I just thank you again for all of your participation in today's call and your interest in MaxSight. Great questions, and I look forward to talking to you all individually. Thank you very much.
spk01: Thank you, and this concludes today's conference call. Thank you for participating. You may now disconnect.
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