MaxCyte Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2024

Key Takeaways

  • MaxSight reported Q2 2024 revenue of $10.4 million, with core sales of $7.6 million (down 9% YoY) and SPL program revenue of $2.9 million (up from $0.8 million YoY), and reiterated full-year guidance of flat to 5% core growth plus approximately $6 million in SPL milestones.
  • The installed base grew to 723 instruments, with processing & assembly (PA) revenue of $3.0 million and lease revenue of $2.6 million remaining stable sequentially, although instrument sales were dampened by cautious capital spending.
  • Five new SPL agreements signed in 2024—including Legend Biotech and BBIO Pharma—bring the total to 28, expanding MaxSight’s pipeline of milestone and royalty opportunities from partners developing complex cell therapies.
  • Vertex’s Exa-cel/Kafshjebi, the first non-viral cell therapy approved in the U.S. and other regions, is active in 35 centers and represents a potential multibillion-dollar opportunity, though related milestones are excluded from 2024 outlook due to timing uncertainty.
  • With $199.8 million in cash and investments and no debt, MaxSight is realigning R&D and GTM resources toward high-growth cell therapy projects while moderating VLX investment to sustain long-term margin and cash discipline.
AI Generated. May Contain Errors.
Earnings Conference Call
MaxCyte Q2 2024
00:00 / 00:00

There are 10 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to MaxSight's Second 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 Please be advised that today's conference is being recorded. I would like now to turn the conference over to Scott Feinberg, Finance and Investor Relations Associates.

Operator

Please go ahead.

Speaker 1

Good afternoon, everyone. My name is Scott Feinberg and I'm responsible for Investor Relations here at MaxSight. Thank you for participating in today's conference call. Joining me on the call from MaxSight, we have Maher Masood, President and Chief Executive Officer and Doug Swirsky, Chief Financial Officer. Earlier today, MaxSight released financial results for the Q2 ended June 30, 2024.

Speaker 1

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.

Speaker 1

The company has no obligation to publicly update any forward looking statements whether because of new information, future events or otherwise. And with that, I will turn the call over to Maher.

Speaker 2

Thank you, Scott. Good afternoon, everyone, and thank you for joining MaxSight's Q2 2024 earnings call. MagSight reported $10,400,000 of total revenue in the 2nd quarter, including core revenue of $7,600,000 and FPL program related revenue of $2,900,000 We are excited with the progress that we have made so far in 2024 afforded by our commercial execution, the continued demand for our EXPAREL Exploration platform and the efforts we have made to continue to provide differentiated end to end support to our customers. We're also encouraged by the 5 new SPLs that we have signed this year, which includes the most recently signed Legend Biotech. Our core business performance was solid in the 2nd quarter with the results in cell therapy and drug discovery that were in line with our expectations.

Speaker 2

Our performance remains tied to the funding environment for cell therapy developers, which remained stable in the 2nd quarter, but has not significantly changed or improved since the Q1 or the time in which we provide initial guidance for 2024. Amidst this current backdrop, we continue to see our customers operate with cautious capital spending mindset. Despite this, the overall market optimism in cell therapy and general scientific evolution in this space leaves us incredibly optimistic about omaxite's long term opportunities. We continue to believe cell therapy will change the paradigm of medicine over the years and we are in the early stages of the future growth of cell therapy. The non viral cell therapy market continues to move towards engineering approaches that involve more complex therapies across an expanding variety of cell and disease types.

Speaker 2

This bodes well for MaxLite given that our technology can support the complexity of new cell therapies to be developed by current and prospective SBL customers in autologous and allogeneic settings. We remain in a strong position to meet our outlook for 2024 and are very optimistic about the future of our business and the cell therapy industry as a whole. To provide some context on our core revenue performance in the 2nd quarter, which Doug will cover in more detail. We grew our instrument installed base to 723 as of June 30. Instrument revenue continues to be impacted by customer caution on capital equipment purchases.

Speaker 2

However, we were pleased with PA revenue of $3,000,000 and lease revenue of 2,600,000 dollars Both declined slightly year over year, but remained stable from the Q1 of 2024. 51% of our core revenue in the Q2 of 2024 was derived from SBL clients, speaking to contribution from both early stage customers and customers in the clinic. As I mentioned before, we reported $2,900,000 of SVL program related revenue in the 2nd quarter, putting us at $6,000,000 in the first half of the year. We are encouraged by SBL clients' continued progress through the clinic, resulting in milestone revenue from Axline. We are also continuing to expand our SPL portfolio as evidenced by 2 new SPL signed in the 2nd quarter, BBIO Pharma and Legend Biotech, bringing our total signed SPL so far in 2024 to 5.

Speaker 2

Our most recently signed SPL that we announced in May, Legend Biotech, is a global leader in the cell therapy industry, developing new cell therapies to target life threatening diseases. They currently have 1 commercial asset and 8 pipeline programs with revenue from marketer products, partnerships and licensing. MagSight's platform provides Legend Biotech with technical, scientific and regulatory expertise to support the development of the company's therapies across a variety of cell types and modalities. The addition of Legend Biotech brings our total number of signed SPLs in our portfolio to 28. It is important to remember these SPL relationships provide us with the opportunity to participate in the success of our customers' programs.

Speaker 2

With unparalleled access to our electroporation technology, trained field sales and application scientists support and our FDA master file and regulatory know how, we firmly believe that Maxar remains the platform of choice within our industry. We have strong relationships with our current SL clients and a robust pipeline prospective STL clients, all of which are working vigorously to develop innovative cell and gene therapies for patients in need. As you likely know, MaxSight supported its SPL customer Vertex in the FDA approval of Kashdevi, the first non viral cell therapy approved in the U. S. Now midway through 2024, we are confident the commercial opportunity for KashJevi remains strong.

Speaker 2

With approval in the United States, Great Britain, European Union, Saudi Arabia and Bahrain, CASH JEWY has the capability to enable life changing treatment to patients worldwide. We are encouraged by the recently presented long term data for CASH JEWY from global clinical trials for over 100 patients with transfusion dependent beta thalassemia. The efficacy demonstrated consistency with primary and secondary endpoints from prior exocell studies. Vertex recently reported they continue to see a growing number of patients begin the treatment journey and approximately 20 patients have already had cells collected with patients initiating the treatment journey in every region where KASTEVA is approved, the U. S, Europe and the Middle East.

Speaker 2

There are now 35 activated centers and Vertex continues to expect to activate approximately 75 total centers globally with the view that cash JV represents a multibillion dollar opportunity. Currently and as previously communicated, we do not have visibility into the timing of patient dosing or completion of infusion given the lengthy process associated once patient oral begins. As such, we continue to exclude cash chevy related commercial milestone revenue from our 2024 outlook and plan to provide you with updates as they come from Vertex. We remain very excited by the potential of KAKIYAHIRI to benefit patients as the 1st and only approved CRISPR gene editing therapy. Over the near, medium and long term, we see significant revenue opportunity from our SBL clients as they progress through the clinic and reach commercialization.

Speaker 2

The next wave of potential commercial opportunities includes approximately 5 programs across 5 SPLs with launch potential in 2027. These therapies have the potential to address solid tumors, lymphoma, leukemia, sickle cell disease and beta thalassemia. Beyond this, we see opportunity for 10 approved programs across additional indications of multiple myeloma and autoimmune disease between 2028 2,030. As we continue to sign new SPLs and our existing SPLs grow and expand, the basket of commercial opportunities in the future grows larger. For the remainder of 2024, we'll remain focused on investing in areas of high growth that align with MaxCyte's core competency, advancing cell therapy innovations.

Speaker 2

Over the first half of this year, we have reviewed our portfolio opportunities and investments and reallocated resources towards high impact projects that promise the best return on investment and long term growth. Commensurate with our realignment, we are reducing our investment in and moderating our expectations for the VLX. We will maximize investments previously made in the VLux, continuing to work with early adopters and future customers. Our portfolio alignment focuses on prioritizing operational efficiencies and sales and marketing reach in cell therapy, which continues to be a large and sustainable growth opportunity for MaxCyte. To wrap up, we are pleased with our solid second quarter results and believe that we remain on track to deliver on our goals for 2024.

Speaker 2

MaxSight's value proposition and the support that we provide to our customers and clients is truly differentiated. And I continue to believe that we are the premier cell engineering platform of choice within the cell and gene therapy industry. With that, I will now turn the call over to Doug to discuss our financial results. Doug? Thank you, Maher.

Speaker 2

Total revenue in

Speaker 3

the Q2 of 2024 was $10,400,000 compared to $9,000,000 in the Q2 of 2023, representing an increase of 15%. We reported core revenue of $7,600,000 compared to $8,300,000 in the comparable prior year quarter, representing a decline of 9%. This includes revenue from cell therapy customers of $6,200,000 which declined 6% year over year and revenue from drug discovery customers of $1,400,000 which declined 18% year over year. Within core revenue, instrument revenue was $1,800,000 compared to $2,100,000 in the Q2 of 2023. Lease revenue was $2,600,000 compared to $2,700,000 in the Q2 of 2023 and processing assembly or PA revenue was $3,000,000 compared to $3,300,000 in the comparable prior year quarter.

Speaker 3

As Maher mentioned, instrument revenue continues to be most impacted by the cautious capital spending environment for our customers. At the same time, lease revenue has remained stable indicating strength in our revenue from clinical SPL partners. PA revenue remains solid in both year over year and sequential performance, which we were pleased to see. We recognized $2,900,000 of SPL program related revenue in the Q2 of 2024 compared to $800,000 of SPL program related revenue in the Q2 of 2023. Year to date, we have achieved $6,000,000 in SPL program related revenue.

Speaker 3

Moving down the P and L, gross margin was 86% in the Q2 of 2024, slightly higher than 85% in the Q2 of 2023. Total operating expenses for the Q2 of 2024 were $20,900,000 compared to $20,700,000 in the Q2 of 2023. The overall increase in operating expenses was primarily driven by growth in sales and marketing expenses. Going forward, the company continues to be disciplined making moderate and targeted investments in high growth areas that offer long term returns. We finished the Q2 with combined total cash, cash equivalents and investments of $199,800,000 and no debt.

Speaker 3

We are increasing our expectations for year end cash equivalents and investments and now expect to end the year with $180,000,000 up from our previous estimate of $175,000,000 This is a result of greater than expected SPL program related revenue in the first half of twenty twenty four as well as disciplined expense management including the realignment of resources that Maher discussed. Continuing with our full year 2024 revenue guidance, we are reiterating our core revenue guidance and updating our SPL program related revenue outlook. We continue to expect core revenue to be flat to 5% growth compared to 2023. We now expect SPL program related revenue to be approximately $6,000,000 in 2024. Our SPL program related revenue is difficult to predict and subject to the timing of partner development programs.

Speaker 3

Our base case expectation for the year indicates we will not receive additional milestones in 2024. As a reminder, our 2024 outlook also does not include royalty revenue from Teshjebi. To close, Maxite remains in a great position to execute on our 2024 outlook with a continued focus on exercising disciplined spend to deliver long term growth. Now I'll turn the

Speaker 2

call back over to Maher. Thank you, Doug. We are proud of our progress thus far in 2024 and look forward to supporting our customers as they progress through the clinic. I would like to thank our MaxSci team for their dedicated work to our company and customers each and every day. With that, I will turn the call back over to the operator for the Q and A.

Speaker 2

Operator?

Operator

Thank And the first question comes from Jacob Johnson with Stephens. Your line is now open.

Speaker 4

Hey, it's actually Hannah on for Jacob. Have you seen any benefit from commercial volumes on the PA or leased instrument side of things? Benefit from the reinsurance, I'm sorry.

Speaker 2

Yes, I apologize. Can you repeat the question again? It broke up there for a second.

Speaker 4

Yes. As it relates to the base business, have you seen any benefit from commercial volumes on the PA or leased instrument side of things?

Speaker 3

So you're asking about whether or not Cash Jabi is having a material impact on our core revenue? Yes. Yes. So we don't break that out separately. I think they keep in mind that the components that we get from participating in the commercialization of that product do include potentially incremental lease revenue, do include obviously the PAs are used in a commercial setting.

Speaker 3

We do not really break that up. The best I can direct you to is sort of customer concentration information that's in the 10 Q, but unfortunately really not in a position for a variety of reasons including maintaining confidentiality since we only have 1 commercial stage partner at this point to break it out, talk about how many PAs were used in the commercial setting is probably not something that we are going to do at this point.

Speaker 4

Okay, thanks. And then one more follow-up. It looks like cell therapy and drug discovery both declined a little bit sequentially. Was it just seasonality? Is there anything else you would call out about that?

Speaker 3

You want me to take

Speaker 2

that one, Doug? Let me take that one, Hannah. So obviously, it declined year over year, but over the course of the year, it's been very consistent. So from Q1 to Q2, we have very consistent sales for both in drug discovery and cell therapy. Drug discovery itself is a small revenue line for us.

Speaker 2

It's tied more a bit to a few customers that we might have some lumpiness with a few customers putting orders in, in certain quarters versus other quarters. But overall, we're very happy with the solid quarter that we have consistent with our Q1 as well and not really comparing it to Q2 of last year, which is a bit of an abnormality.

Speaker 3

Yes. I think the one thing that we tried to make a point of earlier this year as we talked about sort of a lack of seasonality in our business going forward. We are going to see occasional lumpiness. That's just the nature of the business. You see occasionally see customers put in a big order and influence things.

Speaker 3

But in general, we feel pleased where we are at this point with on both drug discovery and cell therapy.

Speaker 4

All right. Thanks. I'll leave it there.

Speaker 2

Thank you, Anna.

Operator

And our next question comes from Julie Simmons with Panmure Liberum. Your line is now open.

Speaker 5

Hi. Thanks very much for taking the question. A couple of things. Firstly, just in terms of SPL agreements, clearly, you did 5 last year. You've done 5 this year already.

Speaker 5

I noticed no more guidance on what you might do for the rest of this year. Are we really going to have to wait more than 6 months for another one?

Speaker 2

Good question, Julie. Good to hear from you again. Obviously, with 3 to 5 has been historically what we feel comfortable we can sign on a regular basis. The sales cycle for signing an SPL can take anywhere from 3 months, 6 months, 9 months, 12 months, right, a little bit longer sometimes depending on the relationship. We don't speak to when those can happen.

Speaker 2

Obviously, if there's another one happens, we have to update that we now have 6. We can't comment until the SPL is signed, but I will say this, we have a healthy SPL funnel, healthy opportunity to SPL customers that will sign over the years. Our focus is more on just ensuring that we're signing those 3 to 5 on a regular basis and not necessarily the timing of whether it happens over the next 6 months or a few months thereafter. So I guess that's a long way, Julie, of saying we can't promise this year, but we have a healthy 3 to 5 on a regular basis that we feel very confident in, especially on the funnel that we have and opportunity list that we have that we can continue to grow our SPLs from 28 to a much larger amount over the years to come.

Speaker 5

Lovely. Thank you. Didn't think you'd say anything, but I had to try. Then just on the gross margin, if you look at that on a core business basis, it's still a little bit lower than where it's been historically. Is that because you're now doing the manufacturing in house and you've yet to get the volumes up to the point where it sort of starts to rebalance a little bit or should we be looking at this sort of level going forward?

Speaker 3

That's certainly a big part of it, Julie. So what we've established here is a manufacturing facility that can support multiple commercial stage customers. And so with that much capacity ready to go to support our customer base, we do have some excess capacity that does change some of the absorption rates. It does impact our margins to have that. We also we're manufacturing quite a bit last year.

Speaker 3

And so with the I guess down year we had last year, we definitely had manufactured more than we need. We want to sure that we maintain appropriate levels of inventory. And so I think we these are margins that have the potential to go back to where they are. But again, we've said it before, we feel really good about the margins we're delivering even as they back down to this level because they're still very substantial and somewhat industry leading at this point and continue to be so.

Speaker 2

Can I add something there as well as well? So Julie, when we brought in manufacturing in house, we knew that we could potentially take a short term hit on margins, but that was it was a positive in our view because we can start controlling the quality and then the capacity of how much we can produce on an annual basis. So in our mind, the short term hit that we're taking is well worth the long term benefit that we're getting out of bringing manufacturing in house, both for us and then also for our customers and partners that we support, especially as our customers get to the clinic, go through pivotal stages and they get to commercialization, that quality and capacity that we're going to have in house will be crucial for our success as well.

Speaker 5

Excellent. Thank you. And just one final one for me. On the VLX where you're sort of clearly pulling back a little bit from some of the additional spending that was going there, Is it going to be sort of that all comes off the cost line? Because I noticed there is a slightly lower expenses than maybe we've seen in the previous quarter.

Speaker 5

I'm just wondering whether that continues or whether there's a sort of reallocation back to the more sort of traditional cell therapy spend?

Speaker 2

Yes. Obviously, we're always and I'll let Doug speak to this as well. We're always looking at our expenses and looking where we can reallocate what we believe that we have the most growth potential. Right now that is in cell therapy. Julie, we see that as a long sustainable business for us.

Speaker 2

Obviously, this what the minimization of spend to VLX, let me speak to the VLX itself a bit more there as well. So the VLX does have a use case study, a very good use case study for us as cell therapy market grows and allogeneic therapies become have more of a stay in the market. The scale and the transfection that we can provide with the BLX is unmatched by anything else currently out in terms of transfection and electroporation platforms. So for us, it's refocusing the VLX as to where the use case is best there. We're continuing to work with the VLX in the biophosphicing space with those early adopters and future customers where there is a need for the scale that provides for transient parts of production.

Speaker 2

But we've minimized spend there because obviously there's not a need for us to continue to spend as much as we have in the past to support those early customers or future customers. But to your point, we're always going to be looking at allocation of our spend, ensuring that we're focusing our spend where we can have the greatest return on investment and where we believe that we have the greatest future growth potential. What that means for the bottom line, I'll let Doug speak to Doug.

Speaker 3

I mean, I think Maher said it perfectly. The only thing I'd add is just to emphasize what we've already said here, which is that we've raised our expectations for how much cash equivalents and investments we'll end the year with just to reflect the fact that again we've had some unexpected milestone revenue come in that we talked about in previous call as well as the fact that we're being more prudent with our expenditures both in terms of VLX and reprioritizing some of that spending, but in other areas as well.

Speaker 5

Lovely. Thank you very much.

Speaker 2

Thank you, Julie. Thank you.

Operator

And our next question comes from Stephen Ma with TD Cowen. Your line is now open.

Speaker 6

Great. Thanks for taking the questions. Maybe just a couple of follow-up questions on SPLs. So, notice that the 5 SPLs signed this year or intend to be on the kind of the mid to smaller size companies. Maybe if you could give us a little bit of color on how BD discussions with larger players are going and maybe any color on how maybe BD discussions are evolving between maybe smaller companies, midsized companies and larger companies and maybe your thoughts on how that mix might change?

Speaker 3

Good question, Steve. Let me speak to that

Speaker 2

a little bit, give you some color in the sense. Obviously, Legend is a bigger company there that is not is obviously a bigger company that we're we've signed and really they've taken their non they're taking a non viral approach based on what traditionally they were pursuing viral approaches to cell therapies. That being said, our focus is really not so much on whether we're working with smaller companies or bigger companies. It's really it's ensuring that we're that company that and we'll say it again. We're working with as many cell therapy companies as we can, whether they're small or big.

Speaker 2

I want to bring you back to kind of we worked with what was considered a small company back in 2013. It was called Inception Therapeutics. And that company is CRISPR. So if we had tried to select which company is a big company or a small company, we would not be working with CRISPR Therapeutics, which is now which license their product to Vertex, which is now cash Jebi, right, which is the 1st non viral cell therapy approved. So our focus is really small, medium, big.

Speaker 2

It's all of them that we're trying to go after. The self empty space is going to continue to grow. I think what is a small company now can become a big company. And what is the program now for a small company can become part of a bigger company as well. We want to make sure we're working with all of them, Steve.

Speaker 2

That's our goal.

Speaker 6

Yes. No, that makes sense. And I appreciate the color.

Speaker 3

Yes. So I was going to add, Steve, this is a portfolio. We're just trying to build a portfolio of really a good client roster that's using the platform in a clinical setting with a potential to generate, developing milestones and ultimately commercialize a product and we can we're spreading our bets if you will and selling all companies that we believe are quality companies in this space. Some of them won't succeed and we wanted to support as many of them as possible so that many of them can.

Speaker 6

Yes, understood. And then if I can squeeze one more in, maybe on your instrument side of your business, Could you give us some color on what you're seeing in the marketplace? It sounds like maybe sales cycles are lengthening or taking longer. Maybe if you could provide some color on how things are looking from the instrument side, given that some companies in the cell and gene therapy and bioprocessing have stated there is some signs of some green shoots or improvements. Maybe maybe kind of square away what others are saying, kind of what you're seeing in marketplace?

Speaker 6

And if you could add also a perspective from maybe larger sized customers versus early stage customers, how those discussions on instrument sales leasing are going? Thank you.

Speaker 3

Thank you, Steve. So with regards to instruments, clearly to break out the difference between the larger companies and the smaller companies, a lot of the capital that's flown that's come into the industry has been more focused on the larger companies, has been more focused on the public companies. So certainly some of these sales cycles have elongated. And so I think there is a difference there. For us, instrumentation is one area where we're able to really build that forecast from the ground up.

Speaker 3

This is sort of an opportunity by opportunity that we're tracking closely through our system as we work with the commercial team, both the sales team and the FAS is to really understand which of these have the best likelihood of converting, what's the probability. We've really tightened up our forecasting and that's why today we're very comfortable that we're going to be able to unless something changes to reach the objectives we set for ourselves, which is at 0% to up 5% guidance on core revenue. So we feel good about where we stand today. There is some occasional lumpiness. We saw like a big Q2 last year in terms of total core revenue.

Speaker 3

But this year, we're not seeing that lumpiness. We are on track to meet our goals. Mayor, do you want

Speaker 2

to add anything here? No, I think one thing to add is, Steve, so we're 1 month into the Q3 and we still feel very confident in terms of what we guided previously in the year. Again, this is we're seeing consistent performance throughout the year. We're seeing it 1 month into Q3 as well. We feel very confident in what we previously guided to.

Speaker 2

And as Doug mentioned, we're doing this on an opportunity by opportunity basis. We have where we've taken a new and fresh look in terms of how we forecast and we're looking at the opportunity. So we feel very confident in the rest of the year, Steve.

Speaker 3

Yes. And just one thing we do want to say is our guidance continues to not be based on some type of improvement in the overall market conditions that we're living through right now. So that represents some upside of things if those green shoots do manifest, but we're feeling good for where we are at this point in the year.

Speaker 6

Okay, great. Thanks for that.

Speaker 2

Thank you, Steve.

Operator

And the next question comes from Matt Larew with William Blair. Your line is open.

Speaker 3

Hi, good morning afternoon. So with VLX sort of being deep, I wanted to ask about future areas of priority for R and D and business development. Obviously, your core technology has had quite a gap over the field, perhaps even as others have tried to catch up. But you're also just one part of a much broader process to do cell engineering and there are others out there that are perhaps trying to create automated or integrated solutions. Most of the R and D on the core platform at least in the last several years has been, been, I would humbly describe as iterative and PA focused.

Speaker 3

What are the things that you can do, if not BLX, to become a bigger company in the space? And does that largely revolve around improvements to your system, your consumables? Or does it involve creating new technologies or acquiring new technologies?

Speaker 2

Yes. Good question, Matt. Let me take that one. So obviously, we've been working on product development internally over the past year. We actually have hired a new Head of Engineering.

Speaker 2

His name is Jeremy Kolenbrander. He joins us from 25 plus years at formerly Terumo and then Solaris as well. Obviously, our focus is on ensuring that we begin to, as you said, have a focus on those new products that are complementary provide complementary workflows to our current customers and provide tangential the tangential needs that they need in terms of the cell therapy workflow that we can begin to provide those type of opportunities and solutions for them. Obviously, without getting into what we're working on for competitive reasons, The R and D focus is one of our priorities for us and that is part of the reason why we're taking a very focused approach as to how we run the organization as well to make sure that we can focus on that R and D, doing it in a sustainable way as well where our financial profile remains very healthy as we focus on the R and D. Our balance sheet remains healthy as well.

Speaker 2

And again, the main focus will be in cell therapy. We see that as a long and sustainable driver for MACSight. We believe in cell therapy. I truly believe that cell therapy is going to change the landscape of medicine over years to come. So there's a huge growth driver there for us.

Speaker 2

And like you said, in the past it's been iterative, but we're trying to be more than just that, right? And that's why there's a focus on bringing in the Head of Engineering and creating those complementary workflows and taking and really starting to provide solutions for those tangential needs of our customers.

Speaker 3

Okay. Thank you. And then you've obviously described having the manufacturing capability and capacity, I should say, to support multiple commercial therapies. In terms of pursuing the broader placement opportunity for your technology with future or current STL partners. Do you have the broader organizational infrastructure in place, be it sales and marketing, field application specialists, etcetera, support not just multiple commercial therapies, but really to penetrate in the way that you want to the total addressable market that

Speaker 2

you have? Yes, great question. That's one of our strengths is the support that we provide to our current Many of them we have with PhDs and years of experience in Many of them we have with PhDs and years of experience in the space. So we feel as though the current organization that we have, we can leverage for the growth that we believe we can drive towards over the next 3, 5 and plus years beyond that. That allows us to penetrate in the current addressable market compared to other competitors, especially smaller competitors that don't have that type of infrastructure and that scientific support or regulatory support that we have.

Speaker 2

So yes, we feel very confident, Matt, to your question whether we have the appropriate sales organization to begin to take advantage of opportunities ahead of us. Okay. Thank you. Absolutely. Thanks, Matt.

Operator

And the next question comes from Paul Kooten with Deutsche Paul, your line now is open. Our next question, it will come from Jack Souda with Craig Hallum Capital Group. Your line is now open.

Speaker 7

Hey guys, this is Jack on for Mac. Can you hear me all right?

Speaker 2

We can hear you, Jack. Absolutely.

Speaker 7

All right. Just when looking at the overall macro environment, so far throughout Q2 earnings, we kind of heard from others participating in the pharma and biotech industry that funny, my rent is improving. Could you provide some more color from what you're hearing from your customers? I know in your prepared remarks that some of them are still being cautious with how they deploy their capital, just kind of interested what you guys are seeing or hearing? Thanks.

Speaker 3

I think the market is improving a little bit. Obviously, you have a day like yesterday, makes you question that a little bit, but it's only one day. For us, we're looking at our detailed forecast. We're feeling very good where we are versus the objectives we set for ourselves and we're just not building any improvement in that significant improvement in the landscape for the industry. Does that mean again, there's not some green shoots out there, some reasons to be optimistic?

Speaker 3

I think certainly, but it's anecdotal. We're seeing some financings. We're hearing some things. But at this point, our goal here is to execute against the plan. And if the market improves, then I think that we will raise the bar for ourselves.

Speaker 2

Yes. Can we add something there as well? I mean, so nothing has changed from the previous quarter in the sense of we're still seeing our customers rationalize their products and their pipeline, focusing on what their lead assets and what they believe has the highest likelihood of going through the clinic and having commercial success. I see that as a good sign, right? That's what you want to see.

Speaker 2

You want to have that healthy rationalization. We're still cautiously optimistic. As Doug mentioned, we're seeing some green shoots here and there. But at the same time, it's still we're tied to the macro environment. It's still somewhat of a challenging macro environment for many companies out there.

Speaker 2

But we're still seeing the same stability that we saw towards the end of last year going to Q1 as well. That stability is there, which is we see that as a positive.

Speaker 7

All right. That makes sense. Thanks for taking our question.

Speaker 2

Yeah.

Operator

And the next question comes from Paul Cooten with Deutsche Numis. Your line is now open.

Speaker 8

Good afternoon guys. Can you hear me okay this time?

Speaker 6

Yes.

Speaker 8

Okay. Sorry about the fall. Just a quick question. I mean PA is a sort of step up on Q4 again. So I'm just wondering if you were seeing any areas of kind of particularly sort of high consumption thinking, sort of non T cell cell types, different targets and some of your new customers coming through there?

Speaker 2

Yes. Obviously, we're seeing a so our customer base is a variety of customers, right? Different cell types has it's always been the case. That hasn't changed for us, Paul. I guess is your question getting towards, is there a concentration of certain sales towards one particular type of modality.

Speaker 2

Is that what you're alluding to Paul?

Speaker 8

Yes, absolutely.

Speaker 2

Yes. No, again, I think it's across the range, whether it's T cells or TILs or TCRs, for different targets, you see obviously you have a lot of companies out there pursuing CD19 or or CD70s. But I would say it's across there's not one particular indication or modality or cell type that we're seeing. In fact, what we're seeing is more complexity in the cell therapy space where you're seeing some of our customers and partners really begin to have 3, 4, 5 edits, whether they're reducing exhaustion of the T cell or creating persistence in the T cell. So it's we're seeing more complexity.

Speaker 2

We're seeing an evolving market itself in the cell therapy space. I wouldn't tie it down to any one particular cell type or target itself.

Speaker 8

Excellent. Thank you. And secondly for me, just going back to the drug discovery side, obviously a fairly weak quarter. Is this sort of a level that you think you can sustain now or should we kind of anticipate sort of continued step downs with VLX, so moving back a little bit?

Speaker 3

So I don't think we're guiding specifically by line, right. So we did see a dip in Q2. When we forecast the rest of the year, we're looking at the PA run rates, we're looking at the specific instrument opportunities, we're looking at the leases that are in place and renewing. So regardless of sort of how cell therapy and drug discovery individually evolve, which again we don't guide separately, we feel confident about the guidance we've set for ourselves. Is there some noise quarter to quarter?

Speaker 3

There always is. And so let's check back in a couple of months here or a few months here and see where we stand. But we're not certainly panicking. We do know there's great applications for our technology on both the cell therapy and drug discovery side. But as we've mentioned, the focus of the company and where we see the biggest opportunity to participate in the downstream economic success of our customers is on

Speaker 2

the cell therapy side. That's right, Doug.

Speaker 3

Thank you very much.

Speaker 2

Yes. Thank you, Paul. Thank you.

Operator

And our next question comes from Mark Massaro with BTIG. Your line is open.

Speaker 9

Hey, guys. Thank you for taking the questions and congrats on the strong quarter. You guys came in above at least my estimates on both the core and the SPL side. But I wanted to start by asking about the SPL. So you started the year with a $3,000,000 target.

Speaker 9

You raised it to 5. You've already done 6.1 or, yes, a little over 6 in the first half. Can you maybe just talk about the types of things that you might have pulled forward in Q2? And it's a little surprising that there's nothing in the back half. Should we consider that upside and maybe just walk me through what the potential opportunity could be as we think about 2025?

Speaker 3

Yes. Thank you. So first off, we're not in a position to provide guidance on 2025. Are we expecting to receive milestones in 2025 and SPL program related revenue include both milestones and royalties? Absolutely.

Speaker 3

We're in a position to guide today, no. The reason why we're suggesting that we won't have any the rest of the year is there were some things that occur earlier in the year than we expected. And in some cases, which we discussed on the last earnings call, there are things that we think would happen this year, really speaks to the lumpiness of this, the difficulty to predict when these development milestones will occur. One of the benefit of having a growing roster of SPL customers is that at some point that lumpiness can smooth out a little bit, but it can be very difficult to predict when a particular milestone is going to be achieved. We're taking a conservative view here as we look at what could hit this year and we probability weight things.

Speaker 3

We say, let's assume that we've gotten done what we're going to this year we're just going to focus on running our business. That milestone money sort of mailbox money. We don't have to think about it. We're not going to set guidance for 2025. Something else gets pulled into 2024, that's some upside.

Speaker 3

We're not counting on it. It's not impacting how we're thinking about the business for the rest of the year.

Speaker 9

Okay, got it. Appreciate that. You guys talked about 5 programs with launch potential in 2027. And then you talked about an opportunity for 10 approved programs across indications of multiple myeloma and autoimmune disease between 2028 and 2,030. Can you maybe just walk me through some of the assumptions in those estimates, maybe talk about probability of success or other assumptions that went in?

Speaker 9

And I assume that the 10 approvals, you're talking about regulatory approval, not just U. S, but full commercial launch globally. Can you maybe just clarify that?

Speaker 2

Yes, absolutely. You're right. So these are regulatory approvals that would be whether it's in the U. S. Or in Europe, whichever occurs first, but most likely it's always in the U.

Speaker 2

S. Let me walk you through a little bit. So for 2020 the reason we're saying in 2017 we could have potentially five approved therapies is there are 3 programs currently about to enter potential pivotal start in 2025. And then we have actually it's almost 4 programs that will be pivotal to start in 2025. And we have one program currently in a Phase 3.

Speaker 2

So when you look at it and you do the timeline as what potentially they can be approved in, conservatively, I think we're looking at 27 for those programs. Same thing thereafter, we have other programs that will be entering into pivotal a few years thereafter. Some of them 1 year, 2026 or 2027 is when they're entering into pivotal. So that's where we're projecting that we would have additional approvals back 2 or 3 years after that, so to speak. But really if you look at the near term, you're looking at 3 to 4 programs at a pivotal start in 2025, one program right now in a Phase 3.

Speaker 2

If you do the math, you're looking at approval starting in 20 27. Now in terms of the probability of success, that's tough for us to do, very tough for us to do because obviously if we could do that, we'd be in a different line of business, I guess. But it's the one thing that we talked about I think on our last earnings call. The beauty of the cell therapy market is you'll get insight as to whether there's efficacy possibly sooner than other modalities, right? You can see efficacy with patients and oftentimes with a fewer number of patients.

Speaker 2

So we'll hopefully we'll get more clarity when these when the therapies begin their pivotal starts in 2025. If we see efficacy, obviously, then we'll see it sooner than anticipated. But we feel confident that there are 5 potentially in 27 and then thereafter we can have an additional 5 going into a few years after that.

Speaker 9

Excellent. Thanks guys.

Speaker 2

Absolutely.

Operator

I show no further questions

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