MaxCyte Inc (LON: MXCT) – Advancing the next generation of cell-based therapies.

MaxCyte Inc is an FTSE AIM All-Share Index listed pharmaceutical and biotechnology company founded in 1998 and headquartered in Gaithersburg, Maryland, the United States. MXCT invents premier cell-engineering enabling technology. Using that technology, MXCT works on next-generation cell and gene-editing therapies. All of the top ten global biopharmaceutical companies and other leading drug developers utilise and deploy MXCT’s technology. The Company’s licenses are being used for more than 120 cell therapy programmes. MXCT has a licensing partnership with leading gene editing and cell therapy developers.

Growth Prospects

• Exposure to high-value life science market: MXCT has licensing partnerships with leading gene-editing and cell-therapy companies. This exposure to high-value life science markets drives MXCT’s revenue growth. MXCT’s client base includes the top ten global pharma companies.
• Partner of choice for complex cellular engineering: The Company is the partner of choice for complex cellular engineering. It has fourteen strategic platform licenses. Also, the strategic platform licenses are associated with 75 clinical programmes.
• New commercial and clinical license: The Company recently signed a new commercial and clinical license with Sana Biotechnology. Under this license, Sana Biotechnology would have the right to use MXCT's flow electroporation technology. MXCT would receive program-related milestone payments and platform licensing fees.
• Low leverage and capital raised from equity offering: MXCT boosts low leverage in its balance sheet. Hence, it can easily raise cheap debt to fund its research and development on next-generation cell and gene-editing therapies. Also, it has recently raised about USD 0.2 billion from equity offering.

Key Risks 

• Disruptive innovations: There could be an introduction of new disruptive technologies in the sector. If MXCT is slow to respond to these changes, it could lead to erosion of its business.
• Changes in the regulatory environment: There could be material changes in the regulatory environment surrounding the healthcare market. Delay or failure in adapting effectively could result in significant cost incurrence.
• Pandemic-induced disruptions: A pandemic could create severe disruptions in the healthcare industry. MXCT needs to have an efficient system in place to manage the pandemic.
• Cyber threats: Cyber-attacks could threaten the Company’s valuable client data by bypassing its data protection mechanism. Hence, the Company has to incur costs to protect its sensitive data.
  

Now we will analyse some key fundamental and shareholders statistics of MaxCyte Inc.

Recent Development 

Share offering on NASDAQ: On 3 August 2021, the Company announced that it had successfully completed its offering of 15,525,000 shares of common stock on NASDAQ. The shares were priced at USD 13.00 and raised gross proceeds of ~USD 201,825,000.

Q1 FY2021 Trading Update (released on 12 July 2021)

• Driven by disposable sales in cell therapy, revenue in Q1 FY2021 excluding revenue from milestones surged 30% YoY.
• MXCT completed all material CARMA activities and incurred related operating expenses of USD 3.9 million in Q1 FY2021.
• MXCT did a private placement worth USD 55.3 million in February 2021.
• The Company in Q1 FY2021 signed a new strategic platform licence with Myeloid Therapeutics, Inc. It would offer Myeloid to advance pipeline programs for engineered cell therapies.

Financial and Operational Highlights (for the year ended 31 December 2020 as of 20 April 2021)

(Source: LSE Website)

• Driven by recurring high-margin revenues from both disposable sales in cell therapy and instrument leases, as well as milestone payments from partners, revenue in FY2020 surged 21% YoY.
• Driven by higher milestone revenues and Covid-induced reductions in travel and marketing expenses, EBITDA in FY2020 surged 121% YoY.
• It led to cash position rising by 108% YoY in FY2020.
• The Company expanded its capabilities in new therapeutic approaches during FY2020.
  

Financial Ratios (H2 FY2020)

Share Price Performance Analysis

 (Source: Refinitiv, Research done by Kalkine Group)

On 19 August 2021, at 7:25 AM GMT, MXCT’s shares were trading at GBX 1,010.00, down by 5.16% against the previous day closing price. Stock 52-week High and Low were GBX 1,180.00 and GBX 320.00, respectively.

On a daily chart, the momentum indicator RSI (14-period) is trading at ~45.14 level and moving towards the oversold zone. The stock price is sustaining between the middle and lower Bollinger bands. Hence, there could be an uptick in the stock price in the near term.

In the last year, MXCT’s stock has delivered an excellent positive return of ~206.92%. Also, it has outperformed the FTSE AIM All-Share Health Care index with a return of about 22.82% and the FTSE AIM All-Share index with a return of about 31.91%.

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Business Outlook Scenario

MXCT delivered an excellent performance in Q1 FY2021, with revenue excluding the revenue from milestones rose 30% YoY. The management completed a private placement worth USD 55.3 million in Q1 FY201 and raised further USD 201.8 million from equity offering on NASDAQ. MXCT has low leverage, with a debt/equity ratio of 0.15x, indicating financial flexibility to raise further debt, if required, at a cheaper cost. It will help MXCT to fund its research and development on next-generation cell and gene-editing therapies. The Company could benefit from its exposure to the high-value life science market, its status as a partner of choice for complex cellular engineering, its new commercial and clinical license and low leverage and capital raised from its equity offering going into the rest of FY2021. The management wants to capitalise on a rapidly growing cell-therapy market and boasts of a strong strategic platform license pipeline.

Considering the Company’s decent growth prospects, its strong strategic license pipeline, its continued fundraising, the better liquidity of the business than the industry, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on MaxCyte Inc at the current price of GBX 1,010.00 (as on 19 August 2021 at 7:25 AM GMT), with lower-double digit upside potential based on 43.65x EV/NTM Sales (approx.) on FY21E sales (approx.).

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached. Resistance level 2 is at 52 week high and if Maxcyte Inc attains momentum or breach it, then target price as per valuation table could be seen in the near term as per technical chart analysis.

*All forecasted figures and Peer information have been taken from Refinitiv.

*The reference data in this report has been partly sourced from Refinitiv.

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