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MaxCyte: THE INVESTMENT CASE

‘More of the same, please’: MaxCyte set for another year of “strong growth”

The US-based, London-listed healthcare group topped expectations with its latest results and analysts are tipping it for more success this year
cancer cells
INVESTMENT OVERVIEW: MXCT The Big Picture
MaxCyte is developing treatments that use a patient's own immune system to help fight cancer

Forecast-busting results

MaxCyte Inc (LON:MXCT) beat expectations when it reported revenue growth of more than 30% to US$12.2mln for the year just gone.

The group said more and more drug discovery and development companies are increasingly adopting its technology, hence the uptick.

This, coupled with lower-than-expected research and development costs, means the loss for the year to 31 December 2016 is likely to better the market consensus of US$5mln.

"We have continued to make significant progress across all areas of the business and have achieved for the second year in a row a consecutive 30% year-on-year revenue growth,” said chief executive Doug Doerfler.

What it does…

MaxCyte is essentially two companies in one: It sells and licenses its cell engineering technology to some of the world’s largest pharma and biotechnology companies. This part of the business generated the sales.

And it is also using said technology to develop treatments for cancer that incite the body’s own immune system to tackle the killer disease. That’s a hot area at the moment.

It has developed a technology called CARMA, which is funded from its income and cash reserves.

This is being developed to tackle cancer and it is hoped the platform will be spawn the next-generation immuno-oncology treatments that use the body’s own immune system to fight the disease.

What’s new and innovative, even for this very new and innovative strand of research, is that CARMA is being designed to grapple with solid tumours.

The breakthroughs in this field, such as CAR T-cell immuno-therapies, fight blood-borne illness, and yet 90% of cancers are solid tumours.

Early results from pre-clinical research carried out by the world famous Johns Hopkins Hospital in Baltimore have been encouraging. It also has a collaboration with Washington University in St. Louis.

A US biotech listed in London…

As UK biotechs are beating a trail to the US craving greater understanding and higher valuation, Doerfler and his team have opted to go in the opposite direction.

But why did it go for a listing on a junior stock market 3,640 miles from home?

The answer relates to market perception.

As noted above, MaxCyte is essentially two companies in one. One arm sells and licences cell engineering technology while the other focuses on developing immuno-therapies.

While the Europeans seem to like this hybrid model of self-sustaining development, the Americans would have preferred MaxCyte to have simply focused on the cancer innovation.

The thinking behind the move was that investors on this side of the pond would ‘get’ the company a little better and subsequently back it a little better, too.

What the brokers are saying…

“MaxCyte’s enabling technology is a low risk way of investing in cell therapy,” says Panmure Gordon analyst Julie Simmonds.

“The number of Cell Therapy contracts in which MaxCyte is involved has continued to increase, and these have a long term value beyond the current license fees and consumables revenue.”

Simmonds also reckons that there is “significant value” in the CARMA technology, particularly as the applications extend to liquid tumours, while Flow Electroporation has been shown to be helpful in the gene editing process.

“As both CARMA and the gene editing applications remain at an early stage we continue to exclude these from our current valuation but believe they add significantly to the long term opportunity for investors in MaxCyte.”

Simmonds reiterated her ‘buy’ rating for the stock, although she did recently upgrade her target price to 266p on the back of the 2016 results.

The analyst is expecting the “strong growth” to continue throughout 2017 as well.

The share price…

The only way is up so far for the MaxCyte share price, well almost.

The company listed last March at 70p a pop but that number has more than trebled since then. Much of that growth has come recently too, with the stock jumping from 87p at the beginning of October to almost 230p at the beginning of 2017.

It’s fallen back ever so slightly from those highs and currently trades around the 215p mark, giving MaxCyte a market capitalisation of close to £91mln. 

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