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.
