Where I would invest for long-term exposure to disruptive cell-based medicines

When historians look back at 2020, it won’t be the coronavirus crisis that will claim their interest, but the award …

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

When historians look back at 2020, it won’t be the coronavirus crisis that will claim their interest, but the award in October 2020 of the Nobel Prize in Chemistry to two female scientists for their work on the technology of genome editing. Their ‘CRISPR-Cas9’ discovery – which is also known as “genetic scissors” – enables scientists to make precise changes to the DNA contained within living cells. Put more simply, to ‘rewrite’ the “code of life”.

Since its discovery, the use of CRISPR has exploded. It is being licenced by companies for research, for medicine and for the development of new cancer therapies. The technology could enable humans to treat or even to cure inherited diseases such as sickle cell anaemia.

CRISPR joins other new advances such as CAR T-cell therapies as part of a new vogue of technologies that allow us to reengineer human cells and DNA. These technologies are bringing about a revolution in medicine that will change life as we know it. The US markets are home to the vast majority of the companies who are part of this revolution, but there are also some choice options for UK-focused investors.

MaxCyte (LSE:MXCT) is a London-listed US-based company whose share price has grown five fold over the last year as investors have grasped the magnitude of the oncoming biotech revolution. MaxCyte owns and licenses the proprietary cell-engineering platform technology that biopharmaceutical companies rely on to develop the technologies that they have licensed, such as CRISPR, into new cell therapies, including DNA editing.

For example, in May 2020 MaxCyte entered a licence agreement with Caribou Biosciences that will enable Caribou to utilise the MaxCytre platform to develop its CRISPR gene-edited allogenic T cell therapy programmes. MaxCyte will receive development and approval milestone payments as well as other licencing fees.

Deals like this mean that MaxCyte now has 20 of the top 25 pharma companies as its client, with licences granted to over 120 cell therapy programmes. The aggregate potential value of pre-commercial milestones payments that Maxcyte could receive from current licence deals is over $800m, and MaxCyte could double this annually based on wider trends.

In October 2020 MaxCyte reported half year revenues 30% up on 2019, which were already 30% up on 2018. MaxCyte grew the number of commercial deals that it has in place to 11, up from just four in the previous year. The company also doubled the number of clinical products that it has under development, with over 90 products currently under licence.

MaxCyte revenues are driven by visible high margin recurring annual fees from its cell therapeutics business, as well as instrument sales and clinical milestone payments. As companies continue to licence the CRISPR technology, I believe it is MaxCyte that stands to benefit as it becomes the ‘platform of choice’ for the development of cell engineered projects.

What are the downsides? Revenues may be growing by more than 30% year on year but are expected to be a relatively modest $20m at the full year results in April 2020. And despite MaxCyte reaching break even, a market capitalisation of £354m at the time of writing may seem high. And as a constituent of AIM the liquidity of MaxCyte stock is low, with only 16.5% in public hands.

Investors who feel that too much future growth is already priced in to MaxCyte to make it an interesting investment proposition might want to look deeper into the wider ecosystem of licencing deals for cell and DNA engineering, which is booming. The cell and DNA engineering revolution is only just beginning, and I feel MaxCyte is well position to directly correlate its prosperity with the exponential growth of these new technologies.

Investors who are prepared to play the long game may well get to enjoy the ride from obscure AIM company to FTSE 100 blue chip in less than 10 years. You heard it here first.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Tej Kohli has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Tej Kohli is the founder of the philanthropic Tej Kohli Foundation whose ‘Rebuilding You’ philosophy supports the development of scientific and technological solutions to major global health challenges, whilst also making direct interventions to rebuild individuals and communities around the world. Tej Kohli is also an investor who backs growth-stage artificial intelligence and robotics ventures through the Kohli Ventures investment vehicle.

 

More on Investing Articles

New year resolutions 2025 on desk. 2025 resolutions list with notebook, coffee cup on table.
Investing Articles

1 investment I’m eyeing for my Stocks and Shares ISA in 2025

Bunzl is trading at a P/E ratio of 22 with revenues set to decline year-on-year. So why is Stephen Wright…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Where will the S&P 500 go in 2025?

The world's biggest economy and the S&P 500 index have been flying this year. Paul Summers ponders whether there are…

Read more »

Passive income text with pin graph chart on business table
Dividend Shares

How to invest £20,000 in 2025 to generate safe passive income

It’s easy to generate passive income from the stock market today. Here’s how Edward Sheldon thinks investors should build an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Could the FTSE 100 hit 9,000 in 2025?

The FTSE 100 has lagged other indexes over the last year. But some commentators believe 2025 could be a stellar…

Read more »

Investing Articles

Why selling cars could drive the Amazon share price higher in 2025

After outperforming the S&P 500 in 2024, Stephen Wright's looking at what could push the Amazon share price to greater…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

3 of the best British shares to consider buying for 2025

Looking for UK shares to think about buying next year? These three stocks have all been brilliant long-term investments but…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

5 crucial Warren Buffett investing habits and a stock to consider buying now

Here's a UK stock idea that looks like it's offering the kind of good value sought by US billionaire investor…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

2 legendary FTSE 250 shares I won’t touch with a bargepole in 2025

Roland Head looks at two household names and explains why these FTSE 250 shares are already on his list of…

Read more »