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Anonymous

Weekly Update: SNOW vs Redshift, ODFL, Spirax Sarco, Guidewire, & Cytek

Former Director at AGBL Group, a Cytek Distributor

Cytek Biosciences: A Distributor Perspective

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

{audio:0:01:04} We've become very interested in some of these companies over the last year as the wind has come out of biotech in general and some of these companies have become very cheap. For example, Cytek and MaxCyte, both listed in the US IPO last year, that are down by two thirds from where they had been at their highs. 

{audio:0:02:05} They both have really interesting business models and really interesting areas and I think there's a combination of accessibility to a generalist; MaxCyte sells an instrument with a margin and has consumable throughput. The hard part is understanding the SLPs and the science behind it and understanding how MaxCyte is able to extract such a substantial concession from their customers, from their partners. We really want to understand MaxCyte, whether it's really excellent, or just merely the best solution for now, as well as understand what partners think about MaxCyte? Do they view MaxCyte as a partner or is it a necessary evil? Are they willing to experiment with multiple delivery vectors or is MaxCyte "the one"? 

{audio:0:02:59} On Cytek, we saw in your bio that flow cytometry is an area for you right now and we have actually a bigger position in Cytek, than MaxCyte and would like to understand whether they're truly as groundbreaking and have as big an opportunity –especially in the reagent side – as we'd hope or as they let on. 

{audio:0:03:26} My colleague is the one who's more in the weeds on our team on MaxCyte, so he'll be the one asking you the questions about MaxCyte, and then I'm more in the weeds on Cytek. 

{audio:0:03:44} I want to be very transparent in that, obviously, I've got a very solid understanding of MaxCyte, their business model, and what they do. Cytek, I'm a little less clear on. They are more of an RUO type company, and I'm in the clinical space now. So I'll do my best and I will give you as much information as I can. You'll have to take that with a little bit of a grain of salt, though. 

{audio:0:04:10} That's actually helpful because Cytek got their clinical validation in China. They then got their clinical validation separately for both their instrument and their reagents in Europe and they're pursuing the clinical in the US. That's one of the things I'd most like to know about, the process behind that, how long it should take before they're validated and approved for clinical, and what that means for their business. Maybe that's the angle we could keep it and, for the sake of time, maybe what we'll do then is spend 45 minutes or so on MaxCyte, and then 10 to 15 on Cytek, just going through those subtle points on what it's like to get into the clinic. Does that sound appropriate? 

{audio:0:05:05} Why don't you give us your background, how you got to MaxCyte and what you did there?

{audio:0:05:14} I got my PhD in immunology a long time ago now. In 2006, I did a postdoctoral fellowship and then realized doing basic science and killing 40 mice every other day was not for me so I moved into the commercial world with Beckman Coulter, who was and is a leader in diagnostic flow cytometry as well as having a very large RUO portfolio now. I was there for about eight and a half years, most of which was in a scientific sales consultant role. The last year and a half or so I was in marketing and I discovered that I do not like marketing. From there, I just got kind of tired with my role at Beckman Coulter, and they weren't being very accommodating as to me moving into something different. I ran into a friend of mine, who was the Executive Vice President at MaxCyte, at a meeting, and he called me and told me he had a job for me. It was a welcome change; it was something new. I got to go to small biotech, which is MaxCyte and I really enjoyed my time there. 

{audio:0:06:32} In my role at MaxCyte, I was an account manager, which is a fancy way of saying a sales rep. MaxCyte has an electric operation platform, that is from very small scale to very large scale, and they have consumables that obviously go with that platform. The downside is that their consumables only fit their instruments and nobody else's consumables can fit their instrument. So it's feast or famine with MaxCyte. If you don't play their instrument, you don't get the pull through on recurring revenue. That being said, when you do play some instruments, the pull through is actually pretty substantial. I worked with customers doing all different kinds of transactions. A lot of it was CAR T, a lot of it was protein production. Another component of it was, ironically, virus production to make CAR T's. We worked with a broad number of different investigators from small biotech to academia, to large biopharma. 

{audio:0:07:48} You mentioned that MaxCyte is a biotech. I'm just curious, does MaxCyte think of itself as a biotech or as a tools and instruments company?

{audio:0:08:04} They're more of a tools and instruments kind of company. They're enablers. How's that?

{audio:0:08:20} I wanted to ask about how this works with viral production? I have not heard about that use case, before I get into some of my other questions

{audio:0:08:34} Covid crushed this particular opportunity. I did a very extensive evaluation at a large medical college and they were transfecting a cell line with a virus to make a virus. Once you transfect the cells, they basically package and put together the virus and then they secrete it. Then you harvest the supernatant and boom, you've got a virus with the CAR T of interest embedded in it. 

{audio:0:09:18} Is that a viral vector just on its own? 

{audio:0:09:23} Yes, it's a viral vector. It's been a number of years, but I think they were doing ADV – Adenovirus Associated Virus. You can put in the DNA – either through a virus or through electroporation – the cells then package up the virus, spit it out, and then you can use that supernatant to transfect T cells or NK cells, whatever it is. We did an evaluation where, instead of using a virus, we basically coat the cells in the DNA of interest and then we zap them through the MaxCyte technology with electroporation. They didn't actually do titers, but they were diluting the supernatant from the MaxCyte transfected product versus their virally transfected product like 1 to 50 and getting better transfection efficiency. Had they done a titer, you can see that the cells that were transfected, with electroporation MaxCyte's platform, were kicking out a boatload of virus. Like I said, I find it ironic in that MaxCyte positions itself as an alternative to viral vectors. But at the same time, there are people using MaxCyte to make viral vectors and they're making a ton.

{audio:0:10:47} Are those some of their SPL or SPL partners? Or is this just a one-off use case that we wouldn't hear so much about?

{audio:0:11:00} I would say it's not part of their SPL partnerships, that's for sure. I wouldn't say it's one-off, but it is in the minority. It's the large academic institutions that are looking to do that. I had a couple of them. We also had a company in Minneapolis – we're in Rochester, Minnesota – that was using electroporation technology for a Covid vaccine. I wouldn't say they're one-offs, but they're definitely in the minority. Again, my information is a little dated, as far as I know, they're not using any of that kind of application with their SPL partners.

{audio:0:11:37} No potential for royalties, just altruistic.

{audio:0:11:43} Exactly. I would say there's unlikely to be any potential for royalties with viral vector production.

{audio:0:11:51} Taking a step back, I was hoping you could just walk me through the typical sales cycle; how long does it take? How are the relationships typically started? On top of that, how is MaxCyte viewed by the customers? Is it as like a partner or necessary evil? We'd love to hear about all that.

{audio:0:12:18} I'm happy to answer that but I want you to know that I have a vested interest in MaxCyte; I just want to make that very transparent. I bought all of my stock options when I left. 

{audio:0:12:36} As a preface, could you sum up your thesis on why you think that was the right thing to do?

{audio:0:12:48} When I bought my options, I bought them for very, very little and I knew the direction of the company, and I knew their business model, and I knew they were going to go to the NASDAQ and I had no qualms at all about buying all of the options that were offered to me. I didn't bat an eyelash; it was great when they opened but now not so much.

{audio:0:13:18} Do you maintain your belief in that? Or was it more like you thought the NASDAQ Listing would be a source of upside? 

{audio:0:13:27} No, I still maintain my belief in that because when I left, which was almost two years ago, I saw all of the relationships and the partnerships that were budding between MaxCyte and the pharmaceutical companies and let's face it, CAR T, CAR NK and even getting in the CAR monocyte stuff now is just exploding. I know firsthand that there are pharma companies that are unable to meet demand because there's not enough virus out there; viral vector production cannot meet the demand at all. One, it's really expensive. Two, the wait times are ridiculous. And three, we look at it globally, there's thousands of cell therapy projects or trials that are in the works. Look at like Yescarta, Kymriah and now Abecma. 

{audio:0:14:26} Those are the three first CAR T approved by the FDA in the United States. Those guys are having a hard time meeting demand because people cannot get virus, because it's just hard to make enough. MaxCyte's got electroporation technology where the transfection efficiency of MaxCyte versus a virus is significantly better. I know that because I have seen a Yescarta and Kymriah product insert, with all patients deidentified, but I saw the transfection efficiency. Their spec, as approved by the FDA, was greater than 6% transfection efficiency in CAR Ts. To me, that's ridiculously low. When I left MaxCyte, we had partnered with a company that had their own transposon technology and we were in the 60s. I still maintain my belief that MaxCyte is going to be worth quite a bit of money. Obviously, everybody's kind of in the tank right now. But I look at where the industry is going and everybody trying to be a personalized cell therapy like Yescarta, Kymriah and Abecma. Otherwise, it would be off the shelf products which is the dream; not having to have personalized therapy. You can just grab a vial out of the freezer and throw it into somebody for diffuse large B cell lymphoma, and voila, you've got a treatment. 

{audio:0:15:56} I still have a very strong belief in MaxCyte. I haven't looked at their stock recently because it depresses me. Neither have I looked at my 401K, because that depresses me as well. I'm nowhere near retirement so that's just fine. I just look at where the market is going and where everybody's trying to get into the space and there's just no way to keep up with viral vector demand. For MaxCyte, you buy an instrument, you're transfecting on day one, and, knock on wood, they've never had a backorder on any of their consumables. I think the scalability of MaxCyte is what really sets them apart. I do think that companies view MaxCyte as a partner, as opposed to, as you said, a necessary evil, because their applications team, and their support is really unmatched.

{audio:0:17:02} If a customer had hired a new person, instead of them trying to train in house, we would send an application’s person on site with that new hire, to train them how to use the MaxCyte platform. I think that's really unheard of if you look at their competition, such as Lonza and Thermo Fisher that have these smaller transfection systems. The people doing those demos don't know how to push buttons. They have no clue how to optimize anything, and with MaxCyte's wealth of experience, it doesn't matter what you're doing. If you're trying to make a virus, if you're trying to make a protein, if you're trying to transfect a T cell, they've had so much experience. When they go in, they get the customers off the ground, up and running, at least with some proof of concept and some things to start with, on day one. That's why I've always been impressed with them.

{audio:0:17:56} That's very interesting. Could you walk me through the typical sales cycle? How is the customer initially contacted? How long does it take from there to plant in the sale and then, I guess, an SPL license from that point?

{audio:0:18:21} The sales cycle is a mixed bag. I remember being there and seeing the congratulatory email that one of the account managers had started on this process six years ago. On the flip side of it, I had a conversation with this company in Rochester, Minnesota that was spun off from the Mayo Clinic. I actually knew one of the guys who was there from a previous relationship and that sales cycle took about a month and a half. They hear about MaxCyte from word of mouth, from conferences. A lot of the academic institutions – because academics tend to be pretty frugal – are using the Thermo Fisher, the neon or the nucleofector from Lonza. Those devices are all well and good but scalability is not really their thing. You can do very small-scale stuff easily but if you ever want to scale up, that's a nightmare. With MaxCyte, that's not the case. Part of their sales pitch is that you can go from 25 microliters, up to 100 mils, seamlessly. And there's a lot of truth to that. 

{audio:0:20:04} I guess in your role in sales, did you feel like you were selling a product? Or were you more like a scientist sharing your science and letting the product itself do the selling?

{audio:0:20:21} By far, the latter. Given my background, it was easy for me to talk to customers about what they're trying to do. From a CAR T perspective, anything that was immunology based, I could definitely lend a hand in that but I would really let the results speak for themselves. As I mentioned with that viral vector production, I just said, what more do you need to see? You're diluting the supernatant 50 to 1 and getting better transfection efficiency. They were sold on it but then Covid hits and everything shut down and I don't know what happened with that particular opportunity.

{audio:0:21:18} That's exactly the kind of product you would hope to find, I guess, in the company.

{audio:0:21:29} That's why I enjoyed my time there. I didn't feel like I was selling a product; I felt like I was selling a solution. I was helping people solve a problem. That is very rewarding.

{audio:0:21:45} How much engagement did you need with partners post sales, to make sure they are getting the most of their products or solutions?

{audio:0:21:56} That was dependent upon the account manager. I always did like regular check ins. I would always so to customers, when you need to order consumables, please come directly to me, because then that would give me another touchpoint to make sure everything's on the up and up, they're happy. Do they need more support? We were very engaged with our customers. When I was there, I didn't have a ton of them so it was really easy to keep up with. I can think of one customer that I would just give a blanket yearly discount, and they would just order on their own, just because they were just cranking through it, doing their own thing. But for everybody else, I would stay very engaged with throughout the course of the year. They haven't ordered anything in a while so what's going on? Are they unhappy? One guy said, we just switched projects. But now we're switching back to the one. So actually, I'm glad you contacted me because I need orders.

{audio:0:23:05} In terms of the consumables and instrument count, I'm just trying to wrap my head around it if I'm trying to make an Excel model, trying to predict the typical customer. I understand there's two buckets of customers. For your academic, it might be a little bit all over the place. More so for clinical and perhaps the SPL customers, I'm just trying to wrap my head around how many instruments and what sort of volume of consumables are needed for the pre-clinical phase? Phase one, phase two, phase three and hitting the market, after they have been FDA approved?

{audio:0:23:44} That’s a very challenging question to answer. Let me describe the MaxCyte consumables; this is all on their website, so this is nothing special. They have consumables that can do very, very small volumes; pre-clinical, very early on R&D. They have one that has three wells in it, that can do 25 microliters or less, so you can do three transfections at once. Let me take one quick look just because they were coming up with what they were calling strips, so you could do eight transfections simultaneously and I remember we were very excited about that. Yes, they do have the strip now. 

{audio:0:25:11} Maybe a more productive way to ask this question that would be less challenging would be, for every typical customer, how much did spend increase every year? Would spend increase, generally 10% a year for most customers, 40% a year, would it be all over the place? Would it go down sometimes? 

{audio:0:25:38} I would say the spend for the typical customer would be about 10%. Although we would have some customers; it typically didn't go down. There wasn't usually much of a decrease; it was pretty nominal. I had a customer in Rochester that was just kind of cruising along and then they figured out their process. They were able to generate the final product that they wanted to and then they started buying the large end consumable in droves so it more than doubled their spend. If you look at the link that I sent, this gives you an idea of the different levels of consumables, and MaxCyte's consumables are kind of unique in that they use inert metal. The other qubits that are out there use aluminum. Aluminum can cause lots of problems. When you put a lot of electricity through aluminum, it emits ions and cells don't like that. MaxCyte is different in that the metal that they use is very inert, so it's gentler on the cells of interest. You can see they go down to about 15 microliters, up to 100 mils. And again, their whole sales pitch is that it's seamless scalability. I saw that firsthand. I saw somebody do a 50-microliter transfection and later on, did a three and a half mil transfection with the exact same conditions and got the same result. To anyone interested in scalability, that is priceless.

{audio:0:27:23} Can you briefly walk me through the instrument pricing?

{audio:0:27:37} The ATX, which can do everything up to three and a half mils is the "low end instrument"; it does not have flow electroporation. It caps out at three and a half mills with a consumable called the CL 1.1. If I remember correctly, at list, that instrument is about $85,000. The next instrument up was their STX. MaxCyte positions the STX for protein production and virus production because it does not have what's called a "master file" on record with the FDA, so it's really an RUO instrument. If you want to make a boatload of protein or a boatload of virus, the STX is the way to go. That can do everything the ATX can do, but it can also do the flow electroporation, which is large scale up to, essentially, 100 mils of cell suspension. Then there is the GTX. 

{audio:0:28:47} The GTX is unique in that I think it still is the only electroporation platform that is GMP compliant, and the only electroporation platform that has a master file on record with the FDA. That means that when you use Lonza, or Thermo Fisher, you get to play around with the pulsing, you get to play around with the voltage, you get to play around with all the timing. To me, it's like this huge black box and people are guessing. With MaxCyte, you can't do that because all of their “protocols” are proprietary to MaxCyte. They have some very generic protocols that application scientists will often use when starting out with a customer, but they have protocols that are script-like; if you want to transfect human T cells, they've got a couple of different protocols that are proprietary. 

{audio:0:29:58} If you go to the FDA and you say, we’ve got a CAR T product that we want to start using for a phase one clinical trial, we're using MaxCyte's, that electroporation technology, they’ll even put in their application, their IND, we're using resting T cell 14-3. MaxCyte gives all of that information to the FDA so the FDA can reference and say, we know what they're doing to the cells. It's really kind of cool in that, instead of the customer training guess and figure out what to do, when MaxCyte shows up, they've already got a really good idea of what's going to get you pretty close, out of the box. Having the GMP compliance, the master record on file, makes it much easier to get into the clinic with MaxCyte than it does anybody else.

{audio:0:30:46} Why haven't others done this?

{audio:0:30:50} I think for Lonzo and Thermo Fisher, because they've got such a huge portfolio; if you look at their products, it's in the thousands; MaxCyte's in the tens. I don't think they've got that much interest in doing it. And for Thermo and Lonza, really their bread and butter is academic institutions that just want to do really small-scale stuff. They want to do mouse cells and get published. That's really not MaxCyte's market. The only other company I think that's getting really close to that, and I'm sure it'll happen at some point, is probably Miltenyi. 

{audio:0:31:35} M-I-L-T-E-N-Y-I. Miltenyi has got a flow cytometer; they've got a clinical product in the autoMACS, which is used to purify cell populations of interest. That's an FDA approved medical device. They're big into cell separation. I think Miltenyi is trying to move into the electroporation space and my guess is that they would probably be the next ones to try and get GMP compliance, as well as a master file of some sort with the FDA.

{audio:0:32:27} When you were out there selling the various MaxCyte instruments, how important was this for the partners that you spoke to?

{audio:0:32:36} For some of them, it was critical. For the biopharma companies that are looking to make a CAR T, be it autologous or elegant, they’ve got to be able to say, I have got a GMP compliant instrument. You focus on the solution that's best for the customer and as a sales rep, you focus on what's important. If someone said, I need really good transfection efficiency and didn’t care about GMP, then I would say, the STX or the ATX is the right path for you. So the STX I think is 140, and the GTX is 150 is their ballpark guide list price. 

{audio:0:33:22} But if you had a partner who wanted to buy several of these, would you discount at all? 

{audio:0:33:30} It depended on the customer. It depended on the solution and sometimes it depended on where we were in the quarter. Most of the time it wouldn't be so much a discount so much on the instrument, but it would be, we're going to throw in $5,000 worth of processing assemblers. Every situation was different but there were definitely discounts involved.

{audio:0:34:06} Is there anything else worth asking on Lonzo or Thermo or I guess Miltenyi that really stand out as something we should worry about taking market share from MaxCyte?

{audio:0:34:34} No, I don't really think so. Like I said, for Lonza and Thermo, their bread and butter is academia. MaxCyte has had some infiltration into academia, for sure. When I was there, my best consumable customer was at Northwestern. He was just a very well-funded investigator and he said during the demo, holy shit, they're all green. It's just the transfection efficiency that he was getting with MaxCyte. That sealed the deal for him. I don't think you're going to see a whole lot of impedance on MaxCyte from Thermo and Lonza. Yes, they all have electroporation platforms, but they're kind of playing in different markets. People who buy MaxCyte are people who have money, or people or companies that need to have scalability. The folks that are buying Thermo and Lonza, these are the investigators at the University of Podunk that are trying to transfect mouse B cells and get a publication in the Journal of Immunology; two different markets.

{audio:0:35:57} Any concerns about Miltenyi? I know that they're not there yet. But let's say they get there in a couple of years. Is there anything like an FDA approved master file? How big of a market share problem is that for MaxCyte? Could they just undercut on price and take a lot of share? 

{audio:0:36:21} I don't think so. All I know is that where MaxCyte was two years ago, when I left, they had so much expertise in so many different realms. Protein, virus, cell therapy, and they even partnered with a company here in Minneapolis for a transposon on technology, and transposons are the way that you can make a CAR. The results that they were getting were just outstanding. I saw some results from Miltenyi two years ago, because it was with a customer who was using MaxCyte, but was going to the clinic and was thinking about using Miltenyi as their manufacturer and he showed me the results. I said, that's garbage compared to what you get with MaxCyte and he agreed. At some point, Miltenyi may be a threat but I don’t think that’s anytime soon.

{audio:0:37:19} Our most important question for MaxCyte, is really looking out to how will they do in the next five to 10 years and is this a niche business? Or is this a true dinosaur of a business? For their SPLs, how many of their partners do you think will reach FDA approval, and be at a point where MaxCyte is making royalty revenue? In terms of their current SPL partner list, what percent of those will make it? What is the probability of at least two of those relationships getting there across the line?

{audio:0:38:13} Across the line in the next five years, I'd say the probability is very high because there were some partnerships that were progressing quite nicely two years ago. Like I said, it's the demand for virus that is causing a lot of these companies to look at alternative methods for transfection and MaxCyte is kind of like the way to go, because they've got the GMP compliance, they've got the master file on record. So I got to think, I'm going to definitely wait this one out. I think that they're going to have some of their partners getting into phase two, phase three. Even if they get just one partner with an FDA approved CAR T therapy, that alone will make that company flourish. In the next five years, there's a very high probability that at least a couple of their partners will go to market with an FDA approved product. I like their odds. I really do.

{audio:0:39:24} Why do you think the stock has gone down so much? Is it a sector-specific sell off or something with MaxCyte on its own?

{audio:0:39:55} I think it's sector specific. If you look at it, MaxCyte's operating at a loss, pretty much and they have been for quite some time, but they've got investors who still believe in the business model and what they're trying to do. Any company that's got a negative cash growth is just getting hit hard right now. If you look at the biotechs, another example, another stock that I own that I didn't unload when I should have, is a company called NeoGenomics; they are a very large reference laboratory. They were at 60, and now they're at 8 or 9; maybe they're up to 10. They're a huge company; they're building a new facility in Florida. I’ve grouped them in together – granted one’s biotech and one is a reference laboratory – but it's biomedical sciences. They just got hammered too, and they have a very solid business model. They're competing with Quest and LabCorp for customers and they got shelved. I think it is very market specific. Everybody in that sector has taken a hit right now and I truly believe, over time, that things will get better.

{audio:0:41:21} Something that has come up as a risk that we struggle to wrap our heads around is the safety concerns with gene editing in general, and potentially, the safety concerns with electroporation and MaxCyte's devices, the unintended consequences that editing a gene or changing the cells could have on other parts of the body. How do you think about that? How big of a risk is this?

{audio:0:41:51} What people are not talking about is when you transfect cells with a virus, that can be pretty random, too. You could have insertion into an oncogene that you've just turned on; that's a risk with any kind of transfection. It doesn't matter how you're doing it. Looking back, they thought they cured severe combined immune deficiency years ago with transfection. It turns out, yes, their immune system got restored, but the virus inserted the genes of interest into oncogenes. So nine out of these 10 kids ended up with a leukemia. It is a risk, but it's a risk that's independent of the transfection method, if that makes sense.

{audio:0:42:38} Speaking of any transfection method, how big is the risk? Because if nine out of 10 patients end up with cancer after treating whatever problem they have, that's not ideal. That probably is a deal breaker. How do you think about the probability that this transfection in general is just too risky or dangerous?

{audio:0:43:05} We've got so much better, because the way that they're designing these constructs to be inserted is much better. Have you heard of CRISPR-Cas9? You can do single base pair mutations, which can cause a loss of function, gain of function. Targeting the right gene, we've come by leaps and bounds. You look at these kids that have had Yescarta, or these people that have had Yescarta and Kymriah, there's not so much a worry about random insertion where you're getting, a different leukemia or lymphoma. What most of those people have to deal with is, that the CAR T goes in, it works, it works wonderfully well but then they end up with a relapse and that's independent of transfection, that's independent of the treatment. That's just the nightmare that is cancer. I think now we've got so much better at being directed and guided as to where to put things in, that I think it's much less of a risk now than it ever has been.

{audio:0:44:26} Do you mean MaxCyte, or the science community in general, the scientific community?

{audio:0:44:33} The scientific community in general. We've just got much better at understanding, where do we want to put this thing and how do we design the construct, so we know where we're putting it. The scientific community has really taken leaps and bounds in that regard. The original example I gave you was from probably 15 years ago with those kids with severe combined immune deficiency, but since then, the scientific community has made leaps and bounds as to how to design constructs so that doesn't happen and you put it where you want it to go.

{audio:0:45:09} Shifting back to the partnership question, how many SLP partners do you think they can reasonably add a year? I know that they have a goal in mind. I think it's like four a year, but what do you think is reasonable?

{audio:0:45:27} That's the beauty for MaxCyte's model in that once they get the partnership, all they have to do is make sure they got consumables in stock. It's on the partner, the biotech or the biopharma company for the advancement of the project. MaxCyte could take on 10 to 15 a year, as long as they can provide their partners with consumables, and they've never faltered on that. 

{audio:0:46:06} It seems as if the bottleneck is how many partners are out there willing to sign with them? Do you think that will remain at four? Do you think four per year will be a stretch? Or do you think they could get that 10 to 15 a year, in a couple of years?

{audio:0:46:24} I think to be conservative, I would say four a year would probably make sense. I'm just saying that their capacity could be 10 to 15. If MaxCyte had 15 in one year, they wouldn't be sitting there going, we can't handle this.

{audio:0:46:44} Do you really think that there are four new clinical programs a year that are going to emerge and choose MaxCyte and you think that's reasonable? I want to ask about the newer instrument, that VLX, and we know that that's targeting antibody production. 

{audio:0:47:18} That's not all that new; it was there when I was there. They don't have very many placements. That thing is a behemoth. It's pretty expensive. But if you wanted to make literally gallons of protein, the VLX is a good way to go.

{audio:0:47:36} Do you think it has a really high potential? Or do you think it's a niche giant product?

{audio:0:47:45} Who is the customer for that? Because the big antibody companies like Regeneron, don't seem to be the right customer, so who would it be?

{audio:0:47:55} The Department of Defense had two when I was there; I think there were literally like three or four placements. If you look through MaxCyte's literature, he's got a nice piece in there about protein production. But yes, it's definitely niche. There's not a lot of customers for that, which kind of surprised me, because if you want to make a boatload of protein, that's the way to do it.

{audio:0:48:32} When they were scaling, like the Covid antibody production, why wasn't this something people turn to?

{audio:0:48:42} That's a good question; I don't know. The customer in Rochester, that I was telling you about, they were making a Covid vaccine and they had a GTX. Keep in mind, they were not doing cell therapy. They wanted a GTX because they wanted to do GMP production of a vaccine and GMP production, potentially in the future, for protein. They had the GTX, the CL2, that does 100 mils, they were going through those like butter. That's the company I was referring to when we were talking about 10% growth every year. This place went from, say, 1 to 3.5. I don't know why the VLX wasn't adopted by more. I do know that we had a lot of customers using the GTX for that.

{audio:0:49:42} What do you think about Doerfler and the company culture?

{audio:0:49:49} I loved MaxCyte and the reason I left is because I was itching to get back into clinical diagnostics and MaxCyte is a monster in the world of hematology. They were just in the beginnings of getting into flow cytometry and I got offered an opportunity where I'm national, it's just a really great opportunity. But I think Doug's a wonderful man, he's a great leader. My boss was Tom Ross, Executive Vice President of Sales, one of the best guys I've ever worked for. It's just a very nurturing culture. It's a team effort and there are great people there. I hated to tell them that I was leaving. I just had this opportunity, which has really paid off for me career wise, but it's a great culture, that's a great place to work.

{audio:50:45} Do you have any idea why Doug listed first in the UK before coming to the US?

{audio:0:50:52} That happened before I got there. I think that was just kind of the path of least resistance kind of deal. That to get it publicly listed, it was easier to do it in the UK.

{audio:0:51:09} Do you have a sense of what Doug's grand vision is?

{audio:0:51:15} I think Doug's grand vision is to be an enabler for cell and gene therapy products that can change people's lives. I know that sounds kind of corny, but I think that's his grand vision. In the meantime, they're helping people make protein that they can then turn around and sell to other customers. I think the protein and virus production keeps the lights on. But I think the cell and gene therapy market is Doug's real vision.

{audio:0:51:51} Did you really get the sense that you were working at a mission-driven company where everyone bought into that?

{audio:0:51:55} I did, absolutely. We were hook, line and sinker. We bought into them.

{audio:0:52:08} Do you think MaxCyte stays independent over the next decade? Or do you think like a Thermo or Danaher of the world will come after them?

{audio:0:52:18} I hope not. I came from a Danaher company, and I have no desire to go back. Personal opinion; I think they're going to be independent for a while, I really do. I don't think Thermo or Lonza are all that interested because they've got like their own platform. As they said, they've got their own market. It may be a Danaher that gobbles them up, but I don't know. Personally, I hope they stay independent.

{audio:0:52:53} Anything else we should be asking about MaxCyte that we haven't?

{audio:0:53:00} You can look at their consumables, their platforms, their mission which are the pluses. The minus has always been price. When dealing with academics, they can buy a nucleofector for $20,000 and then I would come in with an $80,000 instrument. The difficult part about selling MaxCyte is just sticker price. But you get what you pay for.

{audio:0:53:36} Has there been any pushback inside the company from the sales team about lowering price? Was there any debate about selling the instrument for a lower margin, because the instrument margin is quite good and guaranteeing more pull through?

{audio:0:53:57} We've done special deals here and there. But in general, no. They wanted to hold the margin, and I understand that. Like I said, you get what you pay for, and people fighting against the neon or the nuclear factor for months or years. Maybe we are going to come in with an ATX that's three times, four times the cost. But after one week with us, you're going to have a great starting point for your project, as opposed to beating your head against the wall for six to 12 months.

{audio:0:54:40} When you think about your time trying to sell partners on the instrument, would you say you ever lost a sale because of price or does it just make it take longer to effect the sale? 

{audio:0:54:55} One, for sure. But it was, again, an academic institution. They said, I'll just figure it out on the nuclear factor because it only was going to cost me $25,000. But for the pharma companies in the world, no. The sticker price just meant it took a little longer to close. I left in October 2020 when we're just in the middle of the Covid debacle. I kept in touch with my boss and I had five deals close. My boss would call me and I would say, you get to do nothing and some guy got paid on five instruments that I sold. There's my parting gift to you, MaxCyte.

{audio:0:56:28} The instrument is expensive, the margin is great, the pull through is really good. How on earth is MaxCyte able to get a royalty license from partners who are paying for the instrument?

{audio:0:56:49} If you look at the model, on the royalties, one of the lawyer commercials, we don't get paid unless you get paid. As these companies progress, and they get a product to market, an FDA approved cell therapy product, MaxCyte only gets paid royalties when that comes to fruition. They get paid at milestones. They get past the IND, they get past the phase two. If you think about it, if you look at a Merck or Pfizer, a BMS spending $150,000 on an instrument is a drop in the bucket, it's toilet paper. It really is, for those big companies, when they've got millions to billions of dollars coming in from a product to pay a royalty. That to me, makes sense. The beauty of the MaxCyte model is that they will sell say, an ATX for $80,000 to BMS. BMS could take years and do all their R&D and whatever and all they're buying is the consumables. There's no licensing. It's a one-time capital purchase. 

Former Midwest Sales Manager at MaxCyte

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MaxCyte

MaxCyte is a leading cell engineering platform technology to support cell therapeutic discovery, development, and commercialisation. MaxCyte’s ExPERT platform is the leading technology for non-viral ex vivo cell therapy, a market that is forecasted to grow to over $24bn by 2026.

Over the last 20 years, MaxCyte has been developing flow electroporation methods of transfection and is still operated and minority owned by the founder. The company has ~40% market share in US non-viral clinical programs and the ExPERT platforms offer better transfection rates and a faster route to clinic for customers relative to Lonza or Thermo Fisher’s competing solutions.

The company has 13 customers on strategic platform licenses where MXCT receives a recurring instrument license and consumable income per year plus a percentage of sales once the therapy is commercialised. MaxCyte is the highest-quality non-viral cell engineering globally that is positioned to be the platform provider for the future for ex vivo cell therapies.