Good to see everybody. Thanks for coming. 43rd Annual TD Cowen Healthcare Conference. I'm Max Masucci, Life Science and Diagnostic Tools Analyst here at TD Cowen, and we're very pleased to be joined by MaxCyte, market-leading non-viral cell engineering company, and a critical enabler, in our opinion, of the cell therapy field. Next to me is the company's President and CEO, Doug Doerfler. Doug, great to see you in person. Thanks, Max. You too. I'm not sure what the mix of is in the crowd of those that are new to the MaxCyte story and those, you know, that are familiar. Why don't we start with a brief, if possible, overview of MaxCyte's business today compared to when you founded the company in 1998. Just any key differentiating factors, you know, of your ExPERT non-viral cell engineering platform technologies. Yeah, I'll try to do it. Thanks for, thanks everybody for attending today. We formed the company, my colleague was a guy named Joe Fratantoni, who was the Chief of Blood Products at FDA, and his responsibility was the relationship with the FDA and the American Red Cross during the 1980s, which was the HIV crisis, as you can imagine. He was also a hematologist by training and worked very closely with people like Carl June and Malcolm Brenner around using blood cells as drugs. He had this amazing vision, and I had background in transfection technologies across the board. We got together, and his view was if we could figure out a way of non-virally turning a blood cell into a drug, there was a huge opportunity for us to do that. Obviously, with his background in HIV, he was really allergic to anything that had to do with the virus. We focused initially on non-viral. Frankly, in those days, people didn't really understand cell therapy. Non-viral wasn't a thing at the time. We started working in red blood cells, platelets, and then eventually immune cells and stem cells, and built a platform from scratch. That is what we have today, which I think is kind of the quintessential therapeutic platform where we can take a product from ideation all the way through, hopefully, to commercialization on a single platform. It scales, it's consistent, high performance, FDA cleared, it has all the right things that we believe need to be in place to develop a cell-based therapy. We've been working in the field for a couple decades. We have this kind of this unfair advantage, I think, of understanding what is required to do it right, and we built the company around that. Now we have 19 partners that all have non-exclusive licenses to our technology across a broad spectrum of the whole cell therapy field. Obviously hematologic malignancies and solid tumors. We're also moving into neurodegenerative disease, moving into some rare diseases like DMD and ALS. So it's a really exciting time for cell therapy and our—w e'll talk about the business model, I'm sure, but that's kind of the, the history of it. Yeah. You know, you started the company in 1998. Did you think it would take, you know, 25 years for people to still be questioning whether it's a real opportunity or not? You know, a couple things happened. Our first deal was actually with United Therapeutics, believe it or not, which is a company that was developing a cell-based therapy on pulmonary arterial hypertension. We also worked with Carl June on a CCR5 product for HIV back at the University of Pennsylvania. We saw some pretty amazing results from those products. There was challenges in terms of getting the right kind of people that could actually manufacture the technologies. Just weren't available to consistently manufacture these products. Over time, we started to build up that the industry built up that understanding. Then, you know, the world really changed with KYMRIAH and YESCARTA. Yeah. That's when, you know, people really didn't believe at the time that cell therapy, A, was efficacious, and that box got checked with Carl June's work. Two, that FDA would feel comfortable with the risk-reward, and they did. Three, the other big one was that it wasn't commercializable. Mm-hmm. That surely changed with the Novartis' entree, and then also the move by Gilead to acquire Kite. So those three boxes got checked, and that was kind of, I think, really the next launching point for the kind of the engineered cell therapy world. Yeah. Absolutely. You do also sell. You know, you sell to biopharma, biotech companies, researchers, and, you know, through, what we, you know, call the traditional razor-razorblade model. There are some additional licensing fees for customers that advance their work into the preclinical and then clinical development stage. It's a razor-razorblade model, but, you know, you've got recurring revenues in the case of, you know, the PAs, but also the licenses, right, which I'm sure come at a good margin. Is that a decent way of describing the core business, and, you know, the gross margin profile that we see right now? Even before we've seen any real downstream, you know, any major inflection in downstream economics We're in the high- 80s now. We just said 89% or 88%, we've been keeping it up in that 80%, high- 80s, low- 90 number for gross margins, and that's really because of pricing power, frankly. The systems are built, they're built handmade actually in Maryland, so they're built like battleships frankly. It has to be that way because we're moving into clinical development, and there probably isn't anything more precious than someone's cells that's gonna be processed and given back to them. The licenses, we do all non-exclusive licenses with these partners. They include an annual license fee, and if you're in the clinic using our technology, it's about $250,000 per instrument per year. We retain the title to it, but we license it to our partners. Preclinical, it's about $150,000 per instrument per year. If you're a licensee, you also, we'll receive milestones on their clinical progress. Some portion of the revenue of the commercial product will come back to MaxCyte either through a sales-based payment or a royalty, plus the single-use disposables, plus the annual lease of the instrument. It's, I think it's a pretty full group of ways that we're able to monetize the technology over a long period of time, and I think there's quite a bit of forward-looking value that we can, you know, create with this, with this business model. Yeah. Just given that we haven't seen a material inflection in the, you know, in SPL revenues thus far, we've seen your gross margins, we can kind of get a sense for what the core business gross margins look like. That 89%, 89%-90%, you know, of course I would say would've implied that the instrument is a decent margin. Are the licensing fees 100%— Pretty much. —gross margins? Yeah. Okay. I think so, yeah. In the future we'll see the 100%? We have to amortize the cost of the instrument across a longer period of time, but it's pretty high. Yeah, it's pretty high. Okay, cool. You've seen, you know, you give metrics from time to time, and the consumables ramp has been, you know, has been steady, and you've got, you know, good volume leverage there too, right? Which is obviously critical— Right. —to that number. In the rest of the business where it's not a licensed relationship, that's where we're selling to big pharma, for bioprocessing applications. Mm-hmm. For early pre-clinical cell therapy, we'll sell instruments, or license instruments, and then there's a single-use disposable that goes along with that. Mm-hmm. It gets more typical razor-razorblade business when it comes to that part of the business. Yeah. Great. Okay. Maybe just because I, you know—t he way that we've valued your company in the past, I think there's a few different ways to creatively value it. You know, even if we just value the business on the core, right? We assume no NPV from, you know, future success of products launched by Vertex, CRISPR, Editas, any of your, you know, Allogene, any of your other partners. Right. It still seems like, you know, the stock is, you know, trading at least in life, not at a discount just to peers. If you go EV to gross profit, because it's so high, the discount is even steeper. I'm curious if that's a fact, if that's more just a factor of education, right? If it's a factor of market cap, trading liquidity, and whatnot. But just broadly speaking, as we think about that core business alone, over the past, you know, year, let's say, and then, you know, couple. And then let's say maybe the past six months, and then the past, you know, 12 to 18, you know, how sustainable has that growth been, you know, in the core business alone? Yeah. Right? How comfortable can we feel putting a multiple on that if we decide to assign no credit to your downstream— Yeah. —activity? I have a hard time understanding what goes on in the stock market. I'm pretty good at understanding technologies and supply and demand, stuff like that. I need to, you know, really focus on that. We've grown the business consistently 25%, 26% a year for the last six or seven, eight years. I think to 2016 we started really tracking it, and it's been very consistent. I think we just reported core business a little over 26%, so it's been really stable. We manufacture everything we sell and license. You know, again, we take great pride in the quality of the product because, again, they're used for clinical purposes. When you're building a bus iness at 20, a t that rate, you're basically doubling the throughput every three years. That's how we kinda program out the business. I don't know what the value is. It seems unusually low to me right now. On the other hand, you know, we have quite a bit of capital. We were fortunate that we raised quite a bit of capital in 2021. You know, that we don't burn a lot of capital, frankly. I think we've guided I'm looking at my colleague Sean here, about $220 million at the end of 2022. I think we'll report favorably against that. We have plenty of capital and, you know, we're just really focusing on doing what we need to do to build the business. The investments we're making are in. We just moved into a new facility. Yeah. That's to really become more integrated into manufacturing. We've always manufactured. Our instruments are hand-built in Maryland. We are now doing the same with our Processing Assemblies. We're putting up a process development group, building that out. We're also focused really now on alliance management because we have all these partners, some of whom are going late-stage clinical into commercialization. We need to be prepared for that from regulatory perspective— Mm-hmm. —from a supply perspective, from a quality systems perspective. Those are the investments we've been making. We're making those investments really for the long-term value creation of the company, and we think that's the right bet and, you know, the board's 100% behind that. Yeah. I was reading some filings back, yeah, 3+ years ago, around when you started, you know, thinking about, you know, you had just started thinking about the design and capabilities in the facility. Clearly it's been forward-looking and, you know, MaxCyte is supporting exa-cel and TDT and sickle cell. We've got some pretty big catalysts coming up, right? It seems like the timing of the facility build-out and the go lives are in sync. We have the luxury of having a great biotech and biopharma research team. And so we can recycle, you know, quotes from them like, you know, Vertex and CRISPR saying they expect, no, basically—t hey expect a very low likelihood of any constraints on like manufacturing and supply, like when it's, you know, if approved and ready to go, they'll be ready to go. Obviously, they need you. I think that that speaks to the forward-looking nature of the business. Severally, one of the things that they've talked about is the agreement between I know that this is a little bit sensitive, so there's only so much you can talk about. Under the agreement between CRISPR and Vertex is leading the worldwide development of the manufacturing, which includes, you know, commercialization of exa-cel in SCD and TDT. Do you view Vertex's desire to sort of amend that initial collaboration with CRISPR in 2015, they amended it in 2021, basically increased their responsibilities, as, you know, as a vote of confidence in the program, you know, which would be the first, you know, gene edit, you know, gene editing-based cell therapy to make it all the way through supported by MaxCyte? We're really pleased to see that deal. We, you know, we did that deal with Vertex this year too. We converted it with CRISPR. We've been working with CRISPR since they were being incubated by Versant Ventures in Switzerland. We've known that team for quite some time, and we've been involved with them since kind of the whiteboard ideation of that product. That's why I talked about from whiteboard to commercialization. You know, Vertex has a really great reputation in terms of distribution of products like this and getting reimbursement, going through the regulatory issues. We headed that long-term deal with CRISPR. We converted it to Vertex, all the same economics carried through, which was really a great thing for the company. Yeah, we're quite excited about that product. If you've ever seen the clinical data— Mm-hmm. —it's kind of, it gets goosebumps when you see and you hear the stories about these patients. It's pretty cool. Yeah. Yeah. I mean, I think, you know, the financial implications there are, of course, the reason why this conference is being hosted, but the impact on patient care is, you know, holds more value, in my opinion, personally. I feel similarly about some other topics like MRD monitoring, which I'm sure half the people in this room know I'm pretty obsessed with. You know what, it does, you know, does, I think our biotech analysts peg the chance of approval as I wanna say this is a ballpark estimate, upwards of 90%. What sort of ripple effect could that have on the broader and on your, you know, broader industry competitive landscape. Yeah. — being the only non-viral cell engineering platform to successfully take gene editing-based therapy through? Yeah, it's an exciting time for us. I mean, from an economic perspective, we've indicated we get kind of low to mid single digits now when including the royalty and the Processing Assembly and the amortization of the cost of the instrument. Financially, it's really attractive for the company, and obviously one of that is a super high margins, 90%, 100% margin. That's attractive. You know, this will be the first non-viral engineered cell that will be approved. I'm speaking as if that 95% is 100%. You know, what's been fascinating is just the whole idea of this CRISPR technology and how we were looking at this morning, the first paper that was written by the inventor was written in 2012. Here you've got a therapeutic that's been developed within 10 or 11 years of a, of a seminal paper— Yeah. —which is light speed in therapeutic development. You know, you're seeing this with a lot of our partners use CRISPR. They also use, our most recent deal was with Catamaran, which is an NK cell company that uses a transposon-based gene editing tool. We work closely with a number of companies that use meganucleases. They use zinc finger nucleases. A lot of different non-viral tools are available now to develop these drugs. They really weren't available in an approachable way until about 10 years ago. I think you're gonna see a renewed interest in the cell therapy field based on that approval. Really excited about that. Yeah, and there are some bullet points that you have in your slide deck that I think are really interesting, and it's, you know, the number of gene editing technologies that, you know, that can be supported by the platform, and then also some of the growth trends that you've seen in different cells that are being used in the, you know, cell therapies that are being explored with the platform. Safe to say, yeah, it's a pretty flexible platform. Yeah, we're agnostic in terms of the molecules that we put into the cell, and we work, pretty much any cell. I mean, our tagline is, "Any cell, any molecule, any scale." Yeah. That's, that's where we live. You know, we work with NK cells, we work with, you know, gamma delta T's, you name it, we have a team of people that are out there looking for it. We have a, we have an external team, over 40 people in the field now that are all well-trained scientists, are looking for the next, the next indication, the next cell type, the next approach. We bring that in-house. We work it. We. So that when a commercial entity comes in with a product idea, we've already solved that problem, so we can help them accelerate their development work. We can get them from a basically a drop of blood all the way through to, in the case of the GTx, 100 mL of cells, which is usually much more than is required for a therapeutic— Yeah. —intervention. Yeah. I'm poaching a little bit more from our biotech team in this question, but Vertex did have some internal research. It suggested that 80% of patients, this is as it relates to exa-cel, would opt for CRISPR's non-viral approach versus any existing or future competing therapies based on the narrative that LVV-based therapies are a safety risk. I just want to sort of ask, you know, around safety, right? And your latest view of the ExPERT platform, how it's stacking up against other, you know, approaches. Yeah. I think when you're early in the development of a therapy, I think the first and foremost, you're thinking about what you're trying to treat and how you're gonna treat it. Then you back in and figure out how you're gonna do that, and usually it's a virus or a non-viral method. Now you have a lot of options on non-viral, including autologous therapies, as we're seeing with the stem cell. You're also seeing, we're seeing quite a number of even T-cell choosing non-viral approaches 'cause people wanna get away from viruses, and there's a lot of reasons for that. We don't typically like to compare and contrast ourselves to viruses— Yeah. —because that's a decision. You really can't convert someone who's virus into a non-viral or vice versa. That decision's usually made pretty early. There is some other non-viral technologies. I mean, you know, I think we created this sector, this market, the non-viral sector. You know, there's other ways that people are approaching it using lipid nanoparticles, which has been around for a long time. Lipid nanoparticles were originally an adjuvant. They're used as an adjuvant, and that's why they're used in vaccine development, right? There could be some concerns about the toxicity of a lipid nanoparticle in a T cell, for instance, of regulating that. We look very closely at all those different technologies, and our remit to the team is if you find something that works as well as our technology or better, we wanna look at it. We wanna probably bring it in because we wanna be able to offer that to the world. We're not just a, you know, necessarily electroporation company, but we are a non-viral cell engineering company, and that's what we're really focusing our attention on. We have programs to look at other technologies. Again, as things develop that look like they could be attractive to solving the problems that our customers have, we're gonna bring them in, no doubt about it. Yeah. I think a quote from our Q3 note was that our cumulative adjusted EBITDA loss that we were modeling between Q4 2022 and year-end 2025, your cash balance was three times that. Right. You're in. I didn't know that. That's a good. Yeah. Yeah. Obviously you're in a good position. I think I remember some comments at the time of the Nasdaq IPO, essentially, you know, saying, "Look, we have such high gross margins, it's, yo u know, we're investing the money we need to maintain and establish our leadership position. You know, we're not going over the, over the top," right? Yeah, it's— I just want to say, I mean, this is not a business where we're gonna throw numbers on the scoreboard. Yeah. Right? That's just not who we are. You know, we're really focused on problems. I think some of the big problems in the industry are still need to be tackled for this to become a, you know, kind of a global industry, and that is consistency of manufacture. Just this past week, FDA announced a reorganization of their cell and gene therapy group, and have emphasized CMC as a critical element, which really falls really well with how, what we've been saying for quite some time. Mm-hmm. You know, we think that product characterization's gonna be key to solve that problem, being able to predict potency. It's one thing to be able to treat a patient in a, you know, big teaching hospital, where you've got an immunology department and a bunch of PhDs around. It's quite different if you're in a regional hospital, or a local community hospital. That's where eventually we have to be considering this in the long term as therapy to be administered. To do that, you need to have it consistent, and you need to be reproducible, and you have to know what the impact's gonna be on the patient. I think maybe 50% of the questions that I've asked you were actually on the list that I wrote. Those always make for a great conversation. I want to close, just because we're coming up on time, with Catalyst-Rich here, right? What are you most excited about? We now officially I think have both agreed that we think that your stock is undervalued. If there was you know, if there was a key takeaway, you know, for those in the crowd coming out of this discussion, what would that be? Yeah. I think, you know, we're playing for the long term. We've got a business that we've been doing this for a long time. I think we've got some insights into the industry. you know, we understand that it's a complex cell therapy modality, and it's heavily nuanced with science. you know, we provide an entrée into that from a optionality standpoint. I also think that our business is really around long-term value. Yeah. You know, we wanna continue to build the business. We think it's a good rate for a company that's making stuff that, you know, the 25% range, I think that's a good, healthy growth rate. There's some real opportunities for us to really accelerate the revenues of this company and the value of the company once we are associated with the products that are doing great things for people. That's what we're all—t hat's why we're here. Yeah. That's what we're all about. We think about it that way. I think we have the cash and we have the capital to see us all the way through that, and there's gonna be some, I think, some catalysts, like you mentioned, in the not-so-distant future, maybe a year or two away, that's really gonna ramp the revenues and make us profitable. As I said, right now, it's, I think it's properly managed and making the right investments, but eventually it's gonna start paying off— Yeah. — either way. Yeah. Maybe I'll ask one more. Sure. It's on the flip side. What would be the biggest, you know, risk? Is there anything that keeps you up at night? What would be, for investors, the, "Wow, I was not anticipating that" moment? Yeah. I think, anytime, you know, let's face it, this is a new technology. This is a new class of therapies, and there could be safety issues that could pop up. That's the thing that keeps me up at night, 'cause no one— Yeah. — can anticipate it. But I think that there's enough folks around that understand this field pretty well, that they're putting in place the right kinda guardrails that could make it work. For us you know, for us, what keeps us up at night is people, getting, finding the right people to bring into the organization. We have super low turnover. One thing that we really like about our relationship with our customers is that the people that were working with those customers for three, four, five years are still in the company working with those customers— Yeah. — three or four or five years. That's really important when you're doing science, that you have that relationship. You have that understanding of how to develop these products, and making mistakes, and learning from them and moving forward. Those are the things— Great. — that keep me up at night. Well— I will probably not sleep tonight because you asked me that question. I'm sorry to put those thoughts in your brain. I thought it was a definitely a positive discussion. Good question. Yeah, do we have a question in the crowd? Yeah. How do you break down the clinical next generation? I don't think we disclose that. We have 19 partners. Of those 19 partners, I think we have 16 products in the clinic right now. You can— I think we just also said over 600 instruments in the field. We don't give that breakdown. It's definitely the majority. Yeah. Which for us is our pipeline of potential licensees, right? All the work that we're doing pre-clinically, we're doing really to create licensees for the future. That's the whole idea of the business. Yes, sir. Are you actively reaching out for licensees, or are you just kind of answering the recall? They usually come to us when they're thinking about their IND-enabling studies, and they want a technology that can get them through the FDA. We've had over 45 clinical trials that have been initiated on our technology platform. I think honestly we would say we're looking at this. It's a consultative sale almost. Yeah. They try to catch them earlier than that, and we have a pretty good intelligence team that is working in academia, 'cause we also seed academic scientists who are working in CGMP translational medical centers. We don't get into the early-stage research. We try to stay into the late-stage pre-clinical. That's kind of our sweet spot. It's not like your portfolio. Is there any kind of upstream or downstream kind of instances you might wanna add capabilities that are more powerful than the end-all? Yes. The question, though, is around how proprietary are they, and, you know, do they solve a problem uniquely? Again, we don't wanna be in the business of just pushing through technologies that are commoditized. A lot of those are commodity products now. We wanna look for kind of good science, good technology that can solve a problem uniquely, and then we can apply our business model to it. It's a pretty narrow screen, but it's one that we're actively pursuing. Again, we're getting that information from our partners, so we have a pretty good idea of what's needed and what's available. Anyone else? All right. Well, thanks, Doug. Thanks, everybody. Thanks for coming. Appreciate it. Appreciate it.