MaxCyte, Inc.

Good day, everyone, and welcome to the MaxSight Third Quarter 2023 Preliminary Financial Results Conference Call. Today's call is being recorded, and I would now like to turn the call over to Shawn Menarges, Head of Investor Relations. Please go ahead, sir.

Thank you, Lisa, and good afternoon, everyone. My name is Shawn Menarges. I'm the Head of Investor Relations at MaxSight. Thank you all for participating in today's conference call. On the call for MaxSight, we have Doug Dorfler, President and Chief Executive Officer, and Douglas J. Swirsky, Chief Financial Officer. During the call, management will review the preliminary third quarter 2023 revenue results and updated full year 2023 revenue guidance that we released at the close of the market today. After our prepared remarks, we will take questions. We plan to report our full financial results in the third quarter on November 8th. Before we begin, I need to read the following statement. Statements or comments made during this call may be forward-looking statements within the meaning of federal securities laws. Any statements contained in this call that relate to expectations or prediction 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 detail in our SEC filings. The company has no obligation to publicly update any forward-looking statements, whether because of new information, future events, or otherwise. And with that, I'll turn the call over to Doug.

Thank you, Sean, and good afternoon, everyone, and thank you for joining us. This afternoon, we announced preliminary third quarter total revenues expected to be in the range of $7.8 to $8 million. Preliminary core business revenues for the third quarter is expected to be $6.4 to $6.6 million, which is well below our prior expectations. SBL program-related revenue is expected to be approximately $1.4 million in line with prior expectations. Based on our preliminary third quarter revenue results and due to the ongoing broader operating and research environment, we have reassessed our outlook for the remainder of the year. We now expect total revenues for 2023 to be in the $34 to $36 million range. This includes core revenue guidance in the range of $28 to $30 million compared to our previous guidance of roughly flat versus 2022. We are reiterating our SBL program-related revenue guidance of approximately $6 million for the full year. Our enthusiasm for expected milestone payments and commercial relative revenue to become a meaningful contributor in the coming years is unchanged. We believe the development outlook for our SBL partners remain intact. As you are likely aware, later this month, Vertex and CRISPR-XSL will have an FDA advisory committee meeting. We are looking forward to the potential regulatory approval of this important therapy, which we view as necessary for patients. More specifically, we believe it's a welcome opportunity to discuss the clinical impact of CRISPR technology and non-viral delivery. And as previously discussed, we believe we have made the necessary and significant investments in manufacturing, regulatory, quality, and alliance management to support the commercial launch of XSL. We scheduled today's call due to the high level of volatility in our operating environment for biotech companies in general and cell therapy companies in particular, and in order to update our shareholders on the current trends that are impacting our core business. The main driver of the revenue shortfall in the quarter and for the balance of the year in each case compared to our prior expectations is lower than expected processing assembly disposable sales. We believe that the weakness in processing assembly, or PAs, can be attributed primarily to early-stage customers conserving spend due to the current challenging funding environment for them. This has led to lengthening timelines for preclinical and early clinical activities as customers reevaluate their pipeline portfolio and R&D initiatives and focus on their primary assets in order to extend their cash runways. PA sales weakness is evident in early stage customers across cell therapy and drug discovery. Additionally, we believe that the continued PA softness is a result of customers drawing down on their inventory from prior year more than we originally anticipated. We saw a buildup of inventory in 2022, and some of our customers and partners may have anticipated a different operating environment in 2023. or had concerns about overall supply chain constraints that they saw across the market in 2022. Throughout this year, we have seen customers and partners change the way they handle their own inventory as they are focusing on short-term inventory needs to preserve cash, as opposed to long-term, long-range planning we saw in the past. PEA sales have been soft among our clinical SBL partners compared to earlier in the year, This has been the result of delayed clinical timelines due to challenges in obtaining additional funding for their clinical operations. Some SBL partners continue to fund development programs, while others require significant additional capital to complete the development, the full development of their pipeline assets. Companies have been more conservative with their PA usage as a result of heightened capital cautiousness on early stage programs, as they await clinical development milestones from their lead assets to potentially support their fundraising activity. We are actively working to increase our visibility into customer PA patterns and inventory levels. However, this is a challenge because customer activity can change fairly quickly, especially in this funding environment. In addition, when speaking with early stage commercial customers, we have learned that they have become incrementally more conservative on large capital expenditures as the year has progressed, which has impacted our instrument sales. While some SPL partners have become more cautious with their capital, our lease revenues has remained fairly stable year over year, which points to less spending friction among customers that are active in the clinic. A number of our customers have important clinical milestones over the next 12 to 18 months, which we believe will continue to demonstrate the value of the MaxLight platform and our business model. Overall, we are disappointed in our core business performance year to date. The overall macro environment has been unfavorable, and as a result, we have less visibility than we would like. We believe it is imperative to drive commercial execution to improve performance at all stages of our business. The global commercial organization at MaxSight is actively working to increase and expand revenue opportunities for the balance of 2023 and into 2024. Despite our lower-than-expected revenue, our balance sheet remains strong. We believe our cash position is a competitive differentiator in the market, as we have flexibility to continue to invest in our growth. Given the challenging operating environment, we have been prudent with respect to our own expenses in 2023 and still expect to end the year with approximately $200 million in cash. Our year-end cash balance outlook has not changed throughout the year despite the expected decline in core revenues. We believe our adaptability with respect to our cost management reflects our commitment to shareholder value created over the long term. In closing, we remain confident in our ability to support our current SBL partners and to further expand our portfolio of partnerships. We firmly believe in MaxSight's business model and the value proposition that we deliver to cell and gene therapy innovators as the non-viral cell engineering technology of choice. Looking out over the next several years, we anticipate multiple waves of therapies will enter the market, which we believe will ultimately drive value for MaxSight. Now I'd like to open the call for questions.