Good day, and thank you for standing by, and welcome to MaxCyte’s Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to introduce your host for today’s call, Sean Menarguez, Senior Director of Innovation and Business Development. Please go ahead.

Well, thank you, Justin, and good afternoon, everyone. My name is Sean Menarguez, and I am the Director of Innovation and Business Development here at MaxCyte. Thank you all for participating in today’s conference call. On the call from MaxCyte is Doug Doerfler, President and Chief Executive Officer; and Douglas Swirsky, Chief Financial Officer. Earlier today, MaxCyte released financial results for the third quarter ended September 30, 2023. 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 meaning 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 detail 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. Now with that, I will turn the call over to Doug.

Thank you, Sean. Good afternoon, everyone, and thank you for joining MaxCyte's third quarter 2023 earnings call. I will begin with a discussion of our business and operational highlights during the quarter, followed by a detailed financial review from Doug Swirsky, our Chief Financial Officer. We will then open the call for questions. MaxCyte reported $8 million in total revenue in the third quarter at the high end of our pre-announced revenue range. Core revenue was $6.6 million, also at the high end of our pre-announced range. Over the last month, the business has performed in line with the expectations we laid out on our call on October 4, and today, we are reiterating our revenue guidance for the full year of 2023. The operating environment for our customers has largely remained unchanged from when we spoke in October. Our primary focus remains on driving commercial execution to improve performance across our business and the commercial organization at MaxCyte is actively working to increase and expand sales opportunities for the balance of 2023 and into 2024. I will briefly revisit some of the challenges we are facing that drove the pre-announced reduction in our revenue guidance which we pointed to on our call on October 4. The primary driver of core business performance was the softness in processing assemblies or PA sales. We continue to believe this can be attributed to three factors. Early stage customers in cell therapy and drug discovery conserving spend and reevaluating their pipeline portfolio and R&D initiatives. Customers built up inventory in 2022, and due to the prioritization of programs and reduction in spend, the existing inventory has covered more of their PA needs. Additionally, clinical SPL partners are delaying clinical timelines due to challenges in obtaining additional financing for their clinical operations. Another factor affecting our core business performance was early stage customers becoming incrementally more conservative on capital expenditures as the year has progressed, which has impacted our instrument placements. Though we have seen the macroeconomic operating environment play out unfavorably this year, we continue to see cell therapy industry trends that favor MaxCyte's platform. The industry continues to move toward non-viral cell engineering approaches that include multiple pathway engineering steps across many diseases. Specifically, our partners continue to expand their cell therapy indications into new unmet needs, including autoimmune disease, providing us with the opportunity to support our partners as they scale up and scale out their manufacturing process. Furthermore, developers are increasing the complexity of their cell therapy products with multiple edits on the cell, which positions MaxCyte well, given the platform's high cell engineering performance across a wide variety of gene edits and gene-edited modalities. Developers are also looking into multiple doses and/or increased dosing regimens for complex indications, which further supports the market need for engineered large cell volumes. Our customers and partners can leverage our scientific, technical, and regulatory support and capabilities to optimize the clinical manufacturing process for the growing set of cell therapy applications. Just this year, we signed five SPL partnerships that highlight the value that our platform brings to our customers. We continue to see a healthy pipeline of potential partners. All in all, we are encouraged by the non-viral engineered cell therapy trends in addition to the potential for our partners to make an impact as they progress their programs through the clinic and reach commercialization. We remain highly engaged with our customers, both current and prospective, and are excited by the opportunity to expand our SPL partnership portfolio and grow our revenue. In the third quarter, we reported SPL program-related revenues of $1.4 million and remain confident that we will at least meet our guidance of approximately $6 million this year. We believe this high-value revenue line will continue to be meaningful in the coming years as several waves of different therapies we support potentially come to market. We are excited about our partners' progress and look forward to the potential impact of therapies that utilize MaxCyte's platform. Looking ahead, there is substantial clinical milestone and commercial revenue opportunity for MaxCyte as our partners move toward late-stage clinical development and commercialization. The first commercially approved product enabled by our platform, CRISPR, Vertex exa-cel, is nearing the PDUFA date of December 8, 2023, and March 30, 2024, for sickle cell and beta thalassemia, respectively. Just last week, on October 31, the FDA held an outcome meeting to discuss the treatment, highlighting the therapeutic benefit of exa-cel and the important medical advance for the field and for patients. As a reminder, we believe that all necessary investments in manufacturing and regulatory quality have been made on our end to support exa-cel's commercial launch. We look forward to the potential FDA approval of the first non-viral engineered cell therapy product validating MaxCyte's platform, which would also result in a significant milestone payment to us under our partnership with Vertex. We continue to be excited about the prospects of the VLx platform and our expansion into the bioprocessing market. To provide some context, we are looking to help our customers improve workflow efficiency and accelerate time for the pre-clinical and early-stage manufacture of monoclonal antibodies, recombinant proteins, and vaccines. The VLx has a unique capability to enable rapid production of transiently expressed proteins at larger scale for preclinical and early clinical use in a much more efficient time horizon than the standard practice. As a result, customers will be able to evaluate more pre-clinical leads at an appropriate scale and derive conclusions from late-stage preclinical research activities sooner than they normally would, enabling them to proceed with development in a much faster timeframe. The efficiency that VLx brings to the process can potentially accelerate important decisions on late-stage preclinical development, allowing developers to prioritize their clinical investments on the most promising assets. We believe that the current market opportunity for the VLx spans approximately 3,000 preclinical assets in monoclonal antibody, recombinant protein, and vaccine development, and we are optimistic about our opportunities in the coming years. To lead this effort, we recently appointed Ali Soleymannezhad as Executive Vice President of Bioprocessing. Ali has been an important addition to the leadership team at MaxCyte, with almost 20 years of experience in biomanufacturing, bioprocessing, and bioanalysis, including serving as Executive Vice President for separations and purification at Tosoh Bioscience prior to joining MaxCyte. We firmly believe that he will guide the future of MaxCyte’s bioprocessing business, beginning with the growth of the VLx platform. For the remainder of 2023 and into 2024, we are focused on supporting our customers and partners through targeted investments. We have already made substantial progress in enhancing our infrastructure and scientific and manufacturing capabilities to support customers pursuing complex cell therapies in the clinic, as well as when they reach commercialization. Over time, we believe the investments we are making today will derive substantial incremental value as we support multiple partners at various stages of development and commercial activity. In closing, we continue to navigate the current operating environment with tact and flexibility. MaxCyte remains committed to supporting our current SPL partners in their program development and further expanding our portfolio partnerships.

Thanks, Doug. Hello, everyone. Total revenue in the third quarter of 2023 was $8 million compared to $10.6 million in the third quarter of 2022, representing a 25% decline. In the third quarter, we reported core revenue of $6.6 million compared to $9.9 million in the comparable prior-year quarter, representing a 33% decline. This includes revenue from cell therapy customers of $4.7 million and revenue from drug discovery customers of $1.9 million, which declined 40% and 5% year-over-year, respectively. The decline in revenues was primarily the result of softer PA sales as well as weaker instrument sales, primarily in cell therapy due to the challenging funding environment. Revenue from instrument and PA sales was down 44% in the third quarter compared to the previous year, and revenue from leased instruments declined 11% driven by the challenging operating environment that our customers continue to face. We recognized $1.4 million of SPL program-related revenue in the third quarter of 2023 as expected due to our partners' continued progress through the clinic compared to $0.8 million of SPL program-related revenue in the third quarter of 2022. Moving down the P&L, gross margin was 90% in the third quarter of 2023 compared to 87% in the third quarter of the prior year, driven by our mix between core and SPL program-related revenue. Total operating expenses for the third quarter of 2023 were $21.2 million compared to $17 million in the third quarter of 2022. The overall increase in operating expenses was primarily driven by R&D, sales and marketing, and manufacturing expenses. The company continues to strategically invest in commercial sales and marketing operations, innovative product development and field application scientists, automated manufacturing capabilities, as well as business and corporate development to drive long-term growth. We finished the third quarter with combined total cash and cash equivalents and investments of $208.7 million, and of course, no debt. Moving to our full-year 2023 guidance, we updated our outlook on our third quarter preliminary results conference call on October 4, and we are reiterating that outlook today as we expect total revenue for 2023 to be approximately $34 million to $36 million. Core revenue is expected to be approximately $28 million to $30 million for the year, and SPL program-related revenue expectations remain unchanged from our previous guidance at approximately $6 million for the year. Our updated guidance incorporates caution around the challenging funding environment and customer purchasing patterns for the remainder of 2023. As we have discussed previously, the timing of partnership revenue is dependent upon our customers' clinical and regulatory progress, and it's fundamentally more difficult to predict than our core revenues, which has clearly been difficult to forecast this year due to the challenging operating environment discussed earlier. Finally, MaxCyte remains in a strong financial position and continues to expect to end 2023 with approximately $200 million in cash, cash equivalents, and investments and no debt on our balance sheet. Our expected cash burn for 2023 is approximately $27 million, in line with our 2022 cash burn of approximately $28 million. We have prudently managed our expenses and burn in 2023 and executed disciplined cost management to position the company to achieve our long-term goals. I would like to close by reiterating that we remain confident in our 2023 revenue outlook, and we believe that our modest cash burn and balance sheet will support our future plans for long-term growth. Now, I'll turn the call back over to Doug.

Well, thank you, DJ. Overall, despite the challenging operating environment this year, we firmly believe in the long-term outlook for MaxCyte. We're excited about the potential of our partnerships as they progress their assets through the clinic, and we remain committed to expanding our partnership portfolio to support the development of advanced cell-based therapeutics in the growing cell and gene therapy industry. As always, we thank our MaxCyte team, as well as our board, suppliers, investors, partners, patients, and the great industry that we have the honor of serving. With that, I will turn the call back over to Justin for the Q&A.

Thank you. And our first question comes from Dan Arias. Your line is now open.

How are you doing, guys? Thanks for the questions here. Doug, maybe just a couple on the instrumentation side, specifically on cell therapy. Do you expect the lease versus sold dynamic to change at all in light of the things that are going on in the industry, at least has become a bigger part of that mix? And then, on the VLx system, appreciate your comments there. Anything quantitative that you might be able to add on the launch? And then along those lines, I mean, when we think about usage there, I'm curious whether you think some of this program prioritization that's taking place across the industry could impact the adoption curve just in the sense that, to your point, it's a good tool for evaluating preclinical assets. Some of those are being backburnered right now, so maybe less of a need for that kind of horsepower. Do you see that as a likely outcome or not really? Thanks.

There's a lot of questions there, Dan. It's okay, let me talk about, let me take two cuts at this and see if I answer all your questions. On the kind of the business model instrument side, I made a comment about being tactful with our partners, and I think it's truly important that we understand the situation therein. We look at our business model, and we're going to make changes as we feel are appropriate for helping our partners. And we're seeing the rationalization of these pipelines. And I do foresee us possibly making some changes to our approach for the business model, although I don't think there are going to be major approaches. They'll be around the edges. And again, thinking through the new use cases for our technology, moving into autoimmune disease where you have large patient populations. So I think you're seeing the cell therapy industry moving from autologous blood center therapies to solid tumors and now autoimmune, where it's going to open up to serve populations. So we're excited about that. And that, of course, is going to have an impact on our business model. On the VLx, quantitatively we put a slide in the deck that laid out the difference between what we believe our system and being able to produce a protein in a couple of months versus the traditional way, which could be over six months. I think that when there's more rationalization, I think there's going to be a lot more attention placed on speed to market, speed to decisions, and I think that's exactly what we're focusing our attention on. It's whatever we can do to reduce the early-stage preclinical development timeline for these partners. And they could be big pharma or a relatively early-stage ADC company. They're all looking to do the same thing, and that's to get better products into the market faster. If we can cut four, six months, or a year off of that timeframe, we think that's pretty valuable. So we're excited; we think that VLx is coming out at the right time to address some of the problems that we're seeing in the industry at large.

Okay. Appreciate you ticking through those there. Maybe just one quick follow-up to your point. We are closing in on this exa-cel decision here. Obviously, we'll see how that ends up, but if we were to assume approval, I'm just curious about your expectation for a ramp in instrument utilization and consumables consumption as scale presumably takes place there, scale up presumably takes place there.

Well, we obviously can't give you any guidance in terms of what 2024 looks like, and this would be a 2024 event. That said, we have been investing in ensuring that we've got instrumentation support from Vertex's side and CRISPR's side in terms of manufacturing, and we're ready to scale up. I think we just saw an announcement they made, I guess, yesterday in a press release about getting a breakthrough therapeutic designation in Saudi Arabia. So it'll be interesting to see how this business develops and expands, but be assured that we're prepared fully to support them and execute against whatever plan they believe makes the most sense from them commercially.

Okay. Thank you, Doug.

Thank you.

Thank you. One moment, please. Our next question comes from Jacob Johnson with Stephen’s Inc.

Hey, Good afternoon. This is actually Hannah on for Jacob. You've talked about expanding your geographic reach. Is this still a priority in this environment?

That's a good question. I think the world is changing, of course. I think we're all focused on how we can navigate the China situation. I think we are, frankly, this is more of an organic expansion. The science around cell therapy is expanding well beyond the U.S. and Europe, now moving into Eastern Europe, South America, and certainly into APAC. And so we're following where those hubs of activity are. For us to enter into a new geography, it could be as simple as us bringing a field application scientist and a salesperson into that account. It could be as extensive as bringing in a new distributor or building out more on the land field applications people. So I think our interest is always to follow the science, always follow where the commercial cell therapy field is heading, and then we'll make decisions on what makes the most sense from an investment perspective for us.

Thanks. And then you're tracking ahead of your usual three to four SPL additions per year with five this year. How many are you expecting to add total in 2023? And do you expect the annual rate of additions to continue to outpace three to four in the future?

We'll talk about 2024 when we give guidance, so I want to resist talking about that. I think we're pretty comfortable with the five we did this year. We’re really, I don't think we are in a position to talk about anything additional in 2023.

Great. Thanks. I'll leave it there.

Thank you.

Thank you. One moment, please. Our next question comes from the line of Matt Larew with William Blair.

Good afternoon. Earlier this year, there seemed to be a risk restructuring in the pipeline power stations, and over the past couple of months, we've possibly seen a couple more, impacting several of your SPL partners in terms of risk restructuring. I'm curious about your perspective on how much more there might be, based on your interactions with SPL partners or core customers. How much have they reduced their programs to focus on true high-priority assets? How much have they scaled down their teams, as a different way to assess where we are in the industry's drawdown?

I'm trying to understand the question I'm facing. I agree that we are in a situation where companies and partners are scaling back. We've observed a few of them doing this recently, and we are staying in close contact with those customers. Our observations indicate that when the focus shifts to our products, it shows that we are still engaged with them, which is a positive sign. It's a strong point for MaxCyte that we are focusing on our key assets. However, it's challenging for us to predict the next developments as companies typically won't share that information with us ahead of time. They'll make their announcements when they are ready, and we will respond accordingly and manage the situation as best as we can. I'm not certain if I answered your question completely; if you're looking for something more specific, please let me know. I want to ensure I am addressing your concerns, Matt.

No, I guess it was maybe not intentionally big. But I think you addressed on what I was kind of hoping to get at. So the second one would be you referenced, I think, Dan's question around sales versus lease of instruments that you're willing to make changes as appropriate health partners. So that may be an internal change in response to the macro environment. Have you noticed, or were you aware of any sort of external changes, be it competitive behavior around getting away instruments or cutting prices? Have you noticed any price pressure or additional competition kind of in a changing macro environment?

I think our value proposition still holds true. I mean, it's all about reducing risk and accelerating development. And those are two things that all these companies obviously want to do. One indication is our gross margins, 90% gross margins in the quarter. I think that's a tribute to our ability to maintain pricing in the marketplace. So just to give you those kind of data points right now, we're feeling pretty comfortable with where we are in terms of competition. We're not really seeing anything in our area. We have mentioned in the past, we've seen a lot come in and out. A lot of companies that are trying to get into the space, new companies that are trying to figure out how they can take us on. I think that's just a healthy environment. It points to, I think, the importance of non-viral cell engineering in the future. I would project that after exa-cel gets approved, there will even be more people interested in trying to figure out how big that market is and how they can participate. That said, we're in a great position with our partners and our technology, and we're continuing to be the go-to premier company in this space.

Okay. The last one is just a follow-up on VLx. Earlier this year on the fourth quarter call, you mentioned that there was revenue generated in 2022 that would grow in 2023. We're now a little over a year into the launch. So I think it's just an early access focused launch. But can you share anything about how much VLx is contributing to the financial model at this point, or is that something you may be able to start sharing next year?

I think we'll be much more comfortable sharing it next year. Ali is on board, he's doing a great job, really increasing the visibility of the offering to high-profile clients and really just talking about how disruptive this technology is and how important it is going to be for early-stage development of these programs. So I think we’ll be able to provide a much more fulsome view of the strategy and provide some expectations when we do so in 2024.

Okay. Thank you.

Thank you. One moment, please. And our next question comes from Steven Mah with TD Cowen.

Great. Thanks for the questions. Maybe a follow-up to Hannah's questions on SPL adds. Maybe I'll ask it in a different way. This is more with regards to the funnel of your SPL leads has the potential success of exa-cel? Has it led to more business development inbounds or traction with potential partners?

I think the pipeline itself continues to be really, really strong and great. We're having excellent discussions with folks. Some of them would fall into the same camp that we've been talking about,—where they have early-stage development companies, and they really don't have the financial support to move into the clinic. That can pause our SPLs, although I think it's fair to say that we've got other companies that we're working with that have that same situation and they're moving forward. I think my sense is that when exa-cel gets approved, I mean I think you heard it in the AdCom meeting that there was very little concern about the manufacturing of that product. The safety profile looks great, and the clinical evidence was extraordinarily strong. So our sense is that once that product gets approved, I think that's going to check a big box in the industry. And they're going to be looking upon us as the company that’s going to be able to help accelerate and move those non-viral cell therapy assets into the clinic and through the clinic. Again, as we've mentioned, we continue to see an expansion of cell therapies in the new indication areas like autoimmune, for instance, we're seeing a lot of that in the past few months. We're also—and that will require no doubt, more volume of cells to be delivered to patients over a longer period more of a chronic therapy. I think that fits well with the scale and efficiency of our system.

Great. Thanks for that color. And one more question. When you brought the guide down in October, you mentioned inventory destocking of processing assemblies. Some of the Bob production companies recently said on earnings that they're seeing a bottom regarding destocking headwinds. Could you comment on what you're seeing out there? And if you have any customer visibility that suggests maybe there could be an uptick as activity picks up as this excess inventory gets used? Thank you.

Thanks for the question. This is DJ. So part of the challenge in answering that is we've got seven weeks left in the year, and we don't want to start providing guidance for 2024, talking about how we see that year starting off. What we can say is that we've taken a very conservative view on PA sales just because we wanted to ensure that we would be comfortably providing this revised guidance and meet it and possibly exceed it. So we're very close to our customers. We've got a good sense that we've got a good number here for you. A big part of that is PA. If you look at the breakdown of why we're confident with the revised guidance, we have very good visibility into the lease revenue. We've got seven weeks left in the year to execute against a good number of opportunities, of which only a fraction would need to close in order for us to be comfortable with our number. Of course, on the PA side, as we mentioned on the October call, we've really brought that down. We haven't factored into any recovery. We haven’t factored in any of the seasonality that we've seen where you do get some purchases later in the year. We're just basically going off the daily run rate that we saw in Q3, which was depressed, and that gives us some comfort. But to fully answer your question, I think we need to delve into what happens seven weeks from now and in 2024. We're just not in a position to provide too much information there.

Okay. Fair enough. Thanks for the questions.

Thank you. I'm showing no further questions. I'll now hand the call back over to Douglas Doerfler for any closing remarks.

Thank you, Justin, and thanks, everyone, for joining us today and your questions. We look forward to providing an update on the fourth quarter call. So thank you all very much. Have a great Thanksgiving. Thank you.

Ladies and gentlemen, thank you for participating. This concludes today's program. You may now disconnect.