MaxCyte, Inc. (MXCT) Q4 2021 Earnings Call Transcript

MaxCyte, Inc. (MXCT 0.25%)
Q4 2021 Earnings Call
Mar 22, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by, and welcome to MaxCyte's fourth quarter and full year 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today's call may be recorded.

[Operator instructions] I would now like to hand the call over to Sean Menarguez, investor relations. Please go ahead.

Sean Menarguez -- Investor Relations

Thank you, Latif. And good afternoon, everyone. Thank you all for participating in today's conference call. On the call from MaxCyte, we have Doug Doerfler, chief executive officer; and Amanda Murphy, chief financial officer.

Earlier today, MaxCyte released financial results for the fourth quarter and full year ended December 31, 2021. 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 our SEC filings. The company undertakes 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 Doug.

Doug Doerfler -- Chief Executive Officer

Well, thank you, Sean, and good afternoon, everyone, and thank you for joining MaxCyte's fourth quarter and full year earnings call. I'll begin with a discussion of our business and operational highlights during the quarter, followed by a detailed financial review from Amanda. We will then open the call for questions. I'm very excited with our team's performance in 2021 as we became a Nasdaq-listed company and continued to deliver on all of our financial and strategic objectives in our plan.

MaxCyte's platform remains the premier cell engineering technology, supporting the development of advanced cell therapeutics, and we continue to invest in our people and capabilities at a measured but healthy rate. Amanda will provide more details during the call, but I note that we generated very strong fourth quarter and full year 2021 results as outlined in the press release published earlier today driven by robust performance in our core cell engineering business to both cell therapy and drug discovery customers. Fourth quarter revenues were $10.2 million, up 19% over the fourth quarter of 2020. We saw very strong growth in our core business with growth in revenue to customers in cell therapy of 43% and drug discovery of 32%.

For the full year of 2021, total revenue was $33.9 million, representing growth of 30% compared to 2020. Our core instruments and disposables in cell therapy and drug discovery grew 37% in the year, ahead of our historical five-year CAGR of approximately 25%. Our installed base of instruments, both sold and leased, grew to over 500 by the end of 2021 compared to over 400 at the end of 2020. During the year, we also recognized $2.5 million in pre-commercial clinical milestone revenues from our Strategic Platform License, or SPL, commercial partners.

As we have previously indicated, we take the confidentiality of our partnership agreements very seriously. So we'll be unable to answer any specific questions related to our SPL partners and their respective development programs. However, I can say that we are generally excited about the progress our partners have been making in the clinic over the past year. We continue to see additional SPL programs enter the clinic and have seen our existing clinical SPL portfolio progress in the later stages, including pivotal trials, suggesting we may see our first commercial product as early as 2023.

We are extremely proud to be able to support our partners and their efforts to bring advanced therapeutics to patients. We have continued to see our partners invest in ex vivo cell therapies and expand the scope of their research, including new cell types, modalities, and indications, which, if successful, would be positive for MaxCyte over the long term. In addition, our value continues to be further validated by our expanding customer base, including the ongoing success we have had in signing SPLs, with four new SPL agreements in 2021 and one agreement with Intima Biosciences signed in early 2022. We now have 16 SPL partners covering more than 95 programs, of which more than 15% have entered the clinic.

This compares to our last update in January 2021 of 12 SPLs covering over 75 programs, of which more than 15% have entered the clinic. The total pre-commercial revenue potential from our total SPL programs is now greater than $1.2 billion, up from $950 million at the end of 2020. In the near term, we are optimistic about the potential for our SPL partners to generate meaningful revenue from both the research and production progress, as well as clinical milestones over the next 12 to 24 months. Our partners continue to achieve both scientific and clinical success, particularly in moving their next-generation product candidates into pivotal trials.

We also see the potential for several new IND filings by our existing SPL partners for novel ex vivo engineered cell therapies this year. Amanda will share more details around the progression of potential pre-commercial milestones that we expect to see over the next few years. With ongoing investment in the ex vivo engineered cell therapy space, we continue to see strengthening of our SPL pipeline across a variety of geographies, cell types, approaches, and indications and expect additional SPL partnership announcements later this year. The economics of our recent SPL partnerships remain comparable to prior partnerships, representative of the value MaxCyte brings to the relationships and the customers' commitment to a long-term partnership.

Much of our focus in 2021 was investing in the business and refining our strategic plan. One of our investments has been in the VLx instrument, which we released under the ExPERT brand in 2021. After alpha testing the product for several years with select customers and receiving valuable feedback, the VLx has entered the marketplace and we believe will be a disruptive technology in large-scale bioprocessing applications. In 2022, we plan to work with several beta customers on the ExPERT VLx to build applications data that support our expansion into the large-scale bioprocessing market, and we have been encouraged by the interest we have seen from customers participating in the VLx beta testing program.

While the market expansion opportunity for the VLx in the large-scale bioprocessing applications will take time to evolve, we are encouraged by the progress to date and look forward to updating investors on the evolution of the VLx product road map over time. Finally, we launched three new processing assemblies for single-use disposables in 2021, which continued to strengthen the core business for the full year and particularly in the fourth quarter. We are also investing in manufacturing and process development as our partners move closer to the commercial launch of therapeutic products. We are on track with our plans to move into a new facility this year, which more than triples our manufacturing space and expands our process development capabilities.

We also continue to further in-source key elements of our manufacturing process, particularly around processing assemblies. Additionally, we are investing meaningfully in sales and marketing and made substantial progress in 2021, scaling our commercial organization, including our field scientist team. We are hiring at a strong pace and remain committed to maintaining MaxCyte's strong culture of excellence. We are also excited to announce Cenk Sumen joined us earlier this month as MaxCyte's chief scientific officer.

Cenk brings deep experience in technology, applications, and platform assessments, the development of commercial partnerships, and leading collaborations to accelerate scientific and technical innovation. As we look more into 2022, we expect MaxCyte to continue to grow its team across most areas of the organization, particularly in research development and sales and marketing. In closing, we have had an excellent 2021 as we continue to execute our financial and strategic goals. We are very excited about our opportunity going forward, particularly in the cell therapy market, and believe we are making the right investments to drive growth across the business.

I will now turn the call over to Amanda to discuss our financial results. Amanda?

Amanda Murphy -- Chief Financial Officer

Thanks, Doug, and good afternoon, everyone. Focusing on the first quarter, as Doug mentioned, we're happy to report we realized record revenue and growth in our core business in the fourth quarter. Sales to cell therapy customers in our core business grew a robust 43% over the same quarter last year, while sales to drug discovery customers also grew strong 32%. We saw broad growth across the business with strength in instrument sales to both cell therapy and drug discovery customers, as well as processing assemblies, in part aided by the new processing assembly launches that Doug has mentioned earlier.

We did not recognize any SPL program-related revenue in the fourth quarter of 2021, although we recognized $2.5 million for the full year of 2021. We do appreciate, however, the need to provide more transparency on our program economics near term and long term. So we'll provide more details on that front a bit later in the call. Moving down the P&L and looking at the fourth quarter.

Gross margin was 88% in the quarter versus 89% over the quarter prior. The decrease in gross margin was driven by the lower SPL program-related revenues. Excluding those dynamics, gross margin was relatively unchanged. Total operating expenses for the fourth quarter of 2021 were $14 million compared to $10 million in the fourth quarter of 2020.

As Doug mentioned, our current strategy is to continue to make meaningful investments in R&D and sales, and marketing to take advantage of the many opportunities we see to accelerate organic growth over the next few years. The increase year over year was primarily driven by increased headcount across all areas of our business, as well as an increase in stock-based compensation as we outlined in the press release. Ultimately, we came into 2022 with a very healthy balance sheet with total cash and cash equivalents and short-term investments of $255 million as of the end of the fourth quarter and no debt. Moving to our outlook.

For 2022, as we outlined in our press release, we expect revenue from our core business, which includes sales of instruments and disposables to cell therapy and drug discovery customers, as well as lease revenue to our cell therapy customers, to grow between 22% and 25% over the prior year. As Doug mentioned, we remain optimistic about the prospects for our business and believe our SPL partners are well capitalized in 2022 and into 2023. In addition, the business momentum we saw in 2021 continued into the first quarter of 2022. That said, we believe we've captured a more prudent outlook in our guidance given the current broader macro environment and ongoing fluctuating COVID dynamics.

Turning to our SPL Program economics. As we've discussed in our prior -- previous call and also in discussions with investors and analysts, the timing of our SPL revenue recognition is predicated on our customers' clinical and regulatory process and FDA decision making, which obviously we have limited visibility into. That said, we do appreciate the need to provide some forward visibility and transparency externally. Over the past year, we've seen strong progression in our customer pipeline and an increasing number of potential milestones added into the milestone stack as we add more SPL partners.

We expect the timing of milestone revenue to continue to be lumpy over the near-term quarter to quarter as our SPL pipeline continues to mature. We do, however, based on current information, expect 2022 SPL milestone revenue of approximately $4 million. In addition, to help provide some context on the SPL milestone revenue opportunity for MaxCyte over the next couple of years, we've added an additional slide where corporate deck, where we wanted to call your attention to, which can be found on our website at www.maxcyte.com. This new Slide No.

14 attempts to provide a snapshot of how milestones have trended over the past five years in terms of number and phase and how we expect them to trend through 2024. Over the past five years, we've received approximately 20 milestones, which have been comprised of early stage milestones such as IND filing in phase 1, as you would expect. Looking forward, however, based on the information we currently have, we see the total potential of approximately 50 milestones pre-commercial, which is almost three times as much we had over the past five years. These milestones are also increasingly related to later-stage development.

We estimate about a quarter of those 50 are pivotal or later, and 40% are phase 1. These numbers are based on our current SPL partnerships that don't include any future SPL agreements we may sign. As Doug mentioned, there are several opportunities in front of MaxCyte, and we continue to plan on making necessary investments in R&D and sales and marketing to capitalize on those opportunities. Should we expect those investments to increase throughout the year in 2022 as we see the full year impact of headcount added in '21 and continue to invest in those areas in '22.

Now I'll turn it back over to Doug.

Doug Doerfler -- Chief Executive Officer

Thanks, Amanda. In summary, we remain excited about the opportunity to lead the industry forward as the premier cell engineering platform technology supporting the development of advanced cell-based therapeutics. We were pleased to report strong fourth quarter and full year results, as well as set our outlook for 2022. MaxCyte remains well-positioned for growth, and we are excited about the opportunities ahead.

I want to take this special opportunity to recognize our entire global team and board for their full commitment to providing unparalleled technology, products, and support to bring the new generation of cell-based products to patients, providing them additional treatment options. With that, Latif, I'd like to open this up for Q&A.

Questions & Answers:

Operator

Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. Our first question comes from Jacob Johnson of Stephens. Your line is open.

Jacob Johnson -- Stephens Inc. -- Analyst

Hey, good evening or afternoon. Maybe, Amanda, following up on the comment you just made about the progression of SPLs as customers ramp. I guess thinking about it from the core business perspective, can you just frame up what the scale-up for these customers looks like in terms of the number of instruments and the amount of consumables, somebody moving into pivotal kind of needs and what that looks like potentially as they move into commercialization? Just kind of what that scale up in kind of the core business looks like from those customers.

Amanda Murphy -- Chief Financial Officer

Yeah. I'll take a first stab at that and then turn it over to Doug for more comments. I mean we haven't really given that level of context at this point. And obviously, it's variable depending on the approach and indication and all that type of thing.

What we have said, though, is that we've consistently seen the same trend, meaning from a preclinical perspective, we tend to see a lot of usage with our lower-scale processing assemblies because obviously, they're working on optimizing and things like that. And then as you work through the clinical trial process, you tend to see a bit of a dip from a unit perspective because typically the phase 1 trials are smaller. Again, depending on the indication, it can be variable there. And then ramp over time as the customers move through the regulatory process into pivotal and beyond.

So we've kind of laid that out, but that's pretty much what we've given at this point. Doug, I don't know if you have anything else to add there.

Doug Doerfler -- Chief Executive Officer

Yeah. I think, you know, there's an algorithm here we're trying to build. And it's still low numbers, Jacob. But certainly, auto versus allo, and if it's auto, it's going to -- or both of them is going to be how many manufacturing sites they have, and that would also be driven by how many locations they're running clinical trials.

Some of our customers, the partners, use ballroom-type manufacturing processes where other use manufacturing trains. We're seeing also, as customers get more comfortable with our technology and they put products into the clinic, they add more preclinical and nonclinical programs into their own. So we end up with additional product sales for that purpose. So I don't think there's any real clear algorithm we've been able to build.

I think we're still building it. But obviously, they do increase over the course of the relationship with the partner.

Jacob Johnson -- Stephens Inc. -- Analyst

Yeah. Thanks for that helpful context. And then on the kind of beta testing with VLx, I think there's a wide range of use cases for that instrument from maps, viral vectors, and maybe most interesting, the allogeneic side of things. Can you just talk about in those kind of areas where you're seeing the most initial interest, understanding that it's pretty early innings for VLx?

Doug Doerfler -- Chief Executive Officer

Yeah. I think it is still pretty early. I think that the one that we're focused on initially would be the map production because I think that there's an immediate need in the marketplace for that broad -- I think it's a broad TAM expansion opportunity for the company. And we do quite a bit of that in smaller scale with our STx today.

So it's a natural progression for our company or our partners that want to scale the STx up the larger volumes. I think there's still work that has to be done on the VLx applications. The viral vectors are still biology. I mean one of the reasons we brought -- what Cenk joined us was to help kind of across the board and really figure out what sort of use cases we had to ensure we had in place in order to commercialize that in the proper way, the way that MaxCyte likes to do that.

And as I think I've mentioned in prior calls, there's quite a bit of work in making sure that this technology, although it's very disruptive, it does require significant pre- and post-electroporation engineering work, that engineering work that has to be done. And that's one of the reasons that we're investing in process development as a company moving into a new facility so that we can better mirror what our beta testers are using the technology for.

Jacob Johnson -- Stephens Inc. -- Analyst

Got it. Thanks for taking my question. I'll leave it there.

Doug Doerfler -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Julie Simmonds of Panmure. Your line is open.

Julie Simmonds -- Panmure Gordon -- Analyst

Thank you very much. Great for the results, guys. Just a question following up on the VLx as to whether you have any idea as to what the business model for that is going to look like yet. Is this going to be another licensing model? Or is it going to be an outright selling of consumables type of model?

Doug Doerfler -- Chief Executive Officer

Julie, so, you know, part of the beta testing is to really spend the time testing that model. I think it will vary based on the application and very based on the value we bring to the customer. I think it's fair to say that our mindset around this has been to work closely with partners and understand where the pain points are. And work to solving those and then sharing in that upside with them as we do that.

So I think that same mindset will, I think, will be valuable for the company and our partners, frankly, as they see the long-term opportunities for this technology.

Julie Simmonds -- Panmure Gordon -- Analyst

Excellent. Thank you. And just on the expenses side. Clearly, you sort of going to step up since your Nasdaq IPO, as expected.

I mean how much more on a quarterly basis do we expect that to go up? I mean can we use Q4 as a sort of indication as to what it's like going forward? Or is the moving to the new site, the continued recruitment, going to mean that we're going to see continual step-up going into 2022 through 2023?

Amanda Murphy -- Chief Financial Officer

Yeah. I'll take a first crack at that. I mean, I think, as you mentioned, we see quite a bit of opportunity from an investment perspective in terms of driving further growth in cell therapy. And so we're investing quite a bit in headcount, particularly in R&D and sales and marketing.

So I would expect that to increase just because, obviously, we have hired quite a few people. And then you'll see that full year, as I was saying, the full year impact of that in 2022. And then, in addition, we're continuously hiring as well. So we're not giving specific guidance, so to speak, but that's how I would think about it in terms of investment.

Julie Simmonds -- Panmure Gordon -- Analyst

Lovely. Thanks very much. I'll just [Inaudible] thank you.

Operator

Thank you. Our next question comes from Paul Cuddon of Numis. Your line is open. Paul, please make sure your line isn't muted if you're in a speakerphone with your handset.

Paul Cuddon -- Numis Securities -- Analyst

Oh, hi there. [Inaudible] Sorry. Is that working now?

Operator

Yes, sir.

Doug Doerfler -- Chief Executive Officer

Yes.

Paul Cuddon -- Numis Securities -- Analyst

OK, very good. Yeah, good to hear from you both, and congratulations on 2021. I was just hoping for a little bit more color on sort of growth within cell therapy in particular. I mean any major differences between drug discovery actually between capital sales, the processing assemblies and the leases? And with over 500 instruments in the installed base now, are you finding customers are sort of managing and happy with the machines they've got? Or are you having to get a little bit more support sort of alongside those to keep them running smoothly?

Doug Doerfler -- Chief Executive Officer

I'll answer the last part of that, Paul. I mean these instruments are built to last, and there's very little work that has to be done to have them operational. So we really don't have that as an issue. We don't have to really invest much to do that.

I don't -- we can't give specifics, but I will say that the business is performing just really well across the board, leases, product sales, disposables. And every aspect of the business has really been particularly strong.

Paul Cuddon -- Numis Securities -- Analyst

OK. Superb. And in terms of applications, we've seen the importance of your technology for cell therapy. We've spoken about sort of viral vectors and potentially sort of biomanufacturing in the past.

I think this year has seen sort of quite for the last two years, serology has become quite lucrative. There's pseudovirus kind of assays sort of happening within drug discovery. So I'm just wondering whether there's sort of other kind of avenues where you're finding sort of early interest within the ExPERT system that are emerging that could complement where it's historically been very strong?

Doug Doerfler -- Chief Executive Officer

Well, I think in two areas I can comment on directly. I mean one is that we're -- there's a lot of work that's being done on identifying new pathways in cells, right, for engineering and new cell types when we did the Intima deal, which is a [Inaudible] cell. And we're knocking down the CISH pathway, which is apparently an important one. So there's a lot of basic research, I think, that's being done or translational research is being done in the cell therapy space.

So we're seeing a lot of interest in that. In the drug discovery side, on the -- not bioprocessing but small molecule drug discovery, there's still quite a bit of early stage work that's being done to identify new ion channels, new ways of creating iPSC cell lines for the identification and screening of targets, for instance. So that's an area that we keep an active part on, but -- so it's across the board. What we want to be careful of, and I think we've talked about before, is we don't want to get pulled into the academic research part of the life sciences business.

We really want to focus our attention on more business-based commercial-directed and clinical-directed and eventually, commercially directed therapeutic development.

Paul Cuddon -- Numis Securities -- Analyst

OK. Excellent. And just finally, on the -- I think I've got Slide 12 of the corporate presentation, the example, SPL NPV. You've got six programs per agreement launching one year: two fail in preclinical, four enter clinical, one reaches commercial.

OK. So I mean that would be sort of a typical sort of example within the cell therapy applications that you're in and the weighted average NPV of $85 million. I mean that would be sort of a standard calculation that you've run?

Amanda Murphy -- Chief Financial Officer

So Paul, let me take a first stab. So we did -- so that was part of -- that actually was also in the S-1. And what we were trying to really do there is not give a specific or rather give an example SPL. So of course, each individual partnership is different and there's a different number of programs.

So we were trying to give some perspective on if you apply to level of clinical risk through an SPL, which roughly averages six programs per partner. But obviously, that in reality varies. And then just thinking through, assuming one gets to commercial and then the others drop out, you can obviously apply whatever clinical risk you feel comfortable with. But we were just trying to provide an example of what each partnership could be worth in terms of pre-commercial milestones, which are actually pretty consistent across the partnerships given they're more related to regulatory timing and events versus the commercial side, which is, I think what you can see from there is that it could be meaningfully higher, but obviously more variable because you're then talking about indications and that type of thing.

We did only use the first five years of theoretical commercial revenue in that analysis for that perspective. But it was just really to give an example of the value potential from a revenue perspective.

Paul Cuddon -- Numis Securities -- Analyst

Yeah. Very useful. Thank you.

Operator

Thank you. Our next question comes from Dan Arias of Stifel. Your line is open.

Dan Arias -- Stifel Financial Corp. -- Analyst

Hi, guys. Thank you for the questions. Doug or Amanda, I wanted to just ask about drug discovery revenues. If I look back the last couple of years, you've been in a pretty tight $7 million to $7.5 million range for a while, but you did step up this year to closer to $8 million or to over $8 million.

And I remember you talking about the VLx system as having a pretty good opportunity in drug discovery. In fact, I think you just mentioned it on this call. So as we think about that, I mean, is it likely that this with the step-up that we're seeing here and with VLx having a nice opportunity in that portion that we could start to see the drug discovery revenue kind of consistently tick higher in the $8 million to $9 million range going forward, maybe not this year as much but 2023?

Doug Doerfler -- Chief Executive Officer

I'll leave Amanda to talk about the specific numbers. But as I've been -- as we've been talking for the last couple of years, we've recognized that there's a couple of issues going on. One is that the drug discovery bucket is a huge opportunity for us. And we've been able to show, I think, more value to our customers on the cell therapy side.

So I think that there's a -- there's been more attention being paid to the cell therapy group. We've also had the opportunity, since we had more capital, to really start to expand out our commercial team. And part of that expansion is providing us the ability to go a bit deeper into these drug discovery and bioprocessing partners. I think that, that's what you're seeing as a result of that concerted effort to really rebuild that business from where it was several years ago.

So I'm not sure we're going to land from a numbers perspective. But the folks we're bringing in have -- most recently have come out of that world as well. And so we're trying to really balance the cell therapy opportunity with the bioprocessing opportunity and the drug discovery opportunity. Hopefully, that helps.

Amanda Murphy -- Chief Financial Officer

Yeah. And just to add a couple of things. So as you mentioned, we introduced some new processing assemblies, which, I think, benefited the drug discovery part of the business in terms of multi-well PAs that sort of help lower the per-transaction cost. I think that's been a driver.

From a VLx perspective, we're, as you mentioned, seeing very strong interest in the beta customer perspective. But again, this is a new market for us in terms of unnecessarily new applications of the -- as we do those with some of them with pharma customers now, but certainly need to build out the use cases and the supporting data for those over time. So I think what we've been saying and continue to say is that we're very excited about the market opportunity there, as Doug talked about. But again, this is kind of a longer-term two- to three-year-type revenue driver for the company.

Dan Arias -- Stifel Financial Corp. -- Analyst

OK. I mean I don't want to -- I don't mean to be overly picky on the numbers per se because it's $1 million or so here. But I guess the essence of the question was just do you think that drug discovery -- the trajectory for drug discovery could start to tick up a little bit as you work through some of your new products and as you -- to Doug's point on just the opportunity set in front of it such that in a couple of years, maybe you do find that in the double-digit million number? You don't have to endorse the number. I guess I'm just thinking about whether I should start to be a little bit more incrementally positive on where that line goes.

Amanda Murphy -- Chief Financial Officer

Again, we're not giving specific guidance by market. But I think we definitely are encouraged by what we have seen to date in terms of the adoption of some of these new PAs, as we mentioned. There is some sort of -- obviously, with the growth -- on the growth side of it, you're -- there's a comparison dynamic. But I think, obviously, we're -- the run rate now that we have is not with the VLx in the large-scale market.

So that's sort of our current business. And the team continues to look at new PAs that can help continue to meet customer needs, and I think we saw success there on both sides of the equation this year and this quarter so -- especially this quarter. So I'll just kind of leave it at that.

Doug Doerfler -- Chief Executive Officer

Yeah. OK. But just one thing I would add to that, Dan, is that we -- I think we mentioned that we did see some compression on the drug discovery side because of the pandemic and the inability to really get into some of these bigger companies as they weren't operating at full capacity. And I think you're seeing now the big pharma companies, the big biotech companies are coming back in a big way, and I think that's going to be helpful for that segment.

Dan Arias -- Stifel Financial Corp. -- Analyst

Yeah. That is definitely good to hear. OK. And then, Amanda, on the gross margin line, is there anything you would call out from a cadence perspective over the course of the year just given the impact that milestones and royalties have there?

Amanda Murphy -- Chief Financial Officer

Yeah. I think, look, outside of the royalty -- the milestones, sorry, dynamics, we're seeing -- it's pretty consistent. It may -- there may be some puts and takes there, but it's been fairly consistent over the past several years. The quarterly cadence at the milestones is really hard to pin down, as you can imagine, just given it's sort of out of our control, right? It's our customers' regulatory timelines and FDA decision making, which is pretty hard for us to pin down outside of that.

I think we expect gross margin to be fairly consistent. I don't know, Doug, if you have anything to add there, just all else equal with our current business anyways.

Doug Doerfler -- Chief Executive Officer

No. I mean the band is pretty tight. If you look at it, it's one or two points, right? So it's -- so I think Amanda hit it. I think we're comfortable with kind of that level of gross margin to the business.

And as I also mentioned, I think the milestones are going to help push that gross margin number up a little bit. And as we become more basic in manufacturing, certainly in the earlier days when we're manufacturing more SKUs, you're going to see some erosion -- a little bit of erosion in the gross margin, but I think they're going to offset each other.

Dan Arias -- Stifel Financial Corp. -- Analyst

OK. Very good. Thank you, guys.

Operator

Thank you. Our next question comes from Matt Larew of William Blair. Please go ahead.

Matt Larew -- William Blair -- Analyst

Hi. Good afternoon. In terms of the future market opportunity, I think at the time of the Nasdaq IPO, you'd characterized an SPL pipeline of around 50 and I think growing to somewhere like 130 or 140 over the next five years. Just curious if there's been any change to those thoughts.

And then, I guess, part two would be just thoughts around your ability to participate in those opportunities, so more of a competitive question. I know there's been a couple of recent competitor product announcement, and maybe just get your take on that.

Amanda Murphy -- Chief Financial Officer

Well, let me just -- I'll take the first part in terms of the market and how we calculated that and then turn it over to Doug. So that slide's in the deck and essentially, it was sort of a point-in-time analysis where we looked at the pipeline and we said it -- obviously, we don't -- from an SPL perspective, we partner with companies. So we looked at the pipeline that's in our -- that was in our current market where we're seeing a lot of success, so IO and inherited disorders. And we said, "All right, how many of those should be SPL opportunities?" And that's where we came up with the 50.

We have seen incremental interest outside of those markets -- sorry, indications, so autoimmune as an example. And then when we factored in the forward five-year growth, we made an estimate around the impact of current investment and adoption of nonviral technology. So that was really our take at the time. I think as the -- we're continuously seeing increased complexity, right, in the market in terms of cell type and engineering or how much engineering at the cells companies are doing.

So that would all sort of point to increased adoption of other nonviral or nonviral delivery technologies. I think the other thing I would say there is that we're also seeing interest outside of kind of the U.S. and Europe as well. And so that wasn't factored into that analysis.

So we haven't updated that, honestly, since the IPO, but we were just trying to give a perspective. So I would say, if anything, the market is sort of larger at this point. Doug, do you want to take the --

Doug Doerfler -- Chief Executive Officer

Let me comment on that in the second part of the question, Matt. So first off, with strong cell therapy growth, if we're selling or leasing instruments into non-SPL customers, that's a good indication of the strengthening of the pipeline of potential SPL customers, right? Because anyone who's acquiring the technology or licensing technology, they're licensing it for all the attributes that we have and the benefits we provide to our customers. So that's using the baseball analogy because hopefully, we'll start seeing some baseball again, that's the on-deck circle for us. So we want to really make sure we've got a lot of people in the pipeline, a lot of companies in the on-deck circle.

So when they come up for the SPL deals, we've got them captured. And so we just continue to focus our attention on capturing these companies at the early stage. In terms of competition, there's a lot of noise out there, but I think that we're not seeing that having an impact on our close rate, frankly. And we've often talked about kind of the four pillars of our offering, which is high performance of the system in terms of efficiencies, the flexibility in terms of being able to use single buffer, for instance, and preloaded library of validated cell-specific products.

I have to mention that, that's becoming a bigger and bigger issue with the CMC issues around FDA. The scalability is still key and is -- we stand alone in that aspect. And with VLx, we've actually just extended the game by basically 10 times the STx and the GTx. And then the quality, it's the cGMP, it's single-use disposables, it's the master file.

And all four of those things, we excel in each of those four, and there's no one out there that can touch us any of those four. So we're not going to be complacent, continue to push the envelope, but we're not seeing an impact on the business.

Matt Larew -- William Blair -- Analyst

OK. That's great. And then another year for strong instrument placement. Would just be curious if you can give us any sort of color around instrument placement location in terms of cell therapy versus drug discovery or how many of those placements were driven by current customers scaling up their efforts versus new customers adopting the technology.

Doug Doerfler -- Chief Executive Officer

Yeah. I don't think we can give any guidance on that. I do, though, think that we mentioned in the earnings call earlier that we're seeing an uptake in other geographies, which I think is quite important for the company and I think quite important for the whole industry. So we're seeing the fruits of our labor and setting up beachheads in Asian countries and throughout Europe.

And the U.S. is starting to pay dividends. It takes time. We're a small company, but I think you're starting to see kind of the flywheel effect as we put -- as we build out our sales and marketing team, we build out our field application scientists.

We're able to solve -- uniquely solve customer problems in locations that we couldn't really touch before we had the capability and capacity and capital to do so, but now we can do that. So I think we're going to see an increase across the board in the performance of the business.

Matt Larew -- William Blair -- Analyst

OK. And then the last one for me in terms of bringing more manufacturing in-house. I guess could you remind us, is the intention that at the conclusion, all PA assembly will be done internally? And how much at that point would still need to be in-sourced in terms of components versus largely assembled internally?

Doug Doerfler -- Chief Executive Officer

Well, I think it's always wise to keep a balance of external and internal manufacturing. I think it's always prudent from a manufacturing perspective to have multiple sites, at least be able to rely on multiple sites if you run into an issue with either capacity or something were to happen at the site, right? So I don't see us putting all our eggs in one basket. We're not going to be basic in injection molding, for instance. We think that that's better left for companies that are out there doing that on a daily basis.

But what we're really focused on is making sure we have better control over all the components and better control over the assembly and final preparation of the products for our customers. Because what we want to ensure there's obviously some commonality among these different disposables, and we want to control them and we'll be able to control better the mix of finished goods based on the ability to leverage certain individual components. And so I think it's going to help us to build inventories, become more flexible. And as our customers move toward commercialization, I think it's going to be even more important that we've got excess capacity in our manufacturing capabilities to support them.

As you know, in the therapeutics business, there can be rather significant variations in terms of demand for these products, and we want to make sure that we're able to support that.

Matt Larew -- William Blair -- Analyst

Great. Thanks, Doug.

Doug Doerfler -- Chief Executive Officer

Thanks, Matt.

Operator

Thank you. Our next question comes from Max Masucci of Cowen and Company. Your question, please.

Max Masucci -- Cowen and Company -- Analyst

Thanks for taking the questions. Congrats on the continued momentum in the business. First one, the FDA released some new draft CAR-T product development guidance last week. It covers a range of topics, the ideal time to implement manufacturing changes, call to action for better monitoring of critical-quality attributes but -- it's a comprehensive draft guidance, but from a bird's eye view, Doug, it would be great to hear your perspective, if you've had a chance to review it just in the context of your SPL business and your non-SPL core business.

Doug Doerfler -- Chief Executive Officer

Well, sure. Well, you know, a lot of that guidance is focused on CMC and manufacturing control, right? And so there's also -- there's been some comments about the ability to use information around certain manufacturing processes that could be eventually used for cross-referencing for a BLA, for instance. So I think that puts favorably for MaxCyte. I think -- there's also, I think, more interest in ensuring that the consistency of each of these processes is important and that, again, you can manufacture the same product on the same instrument from one run to another and then from one instrument to another instrument and from one location to another location.

And I think we've been working for the last couple of decades to make sure that we can do that. And so our sense is that we've -- this is a welcome validation of what we've been really focusing our attention on over the last at least decade to ensure that we can provide our partners with what they need to move all the way -- into the clinic all the way through the clinic with our master file. I think we mentioned we now have over 40 clinical trials associated with it. So we feel like we're in the right -- we're doing the right stuff.

We think also that guidance provides us with additional opportunities to build the business because what we've learned -- I think we've learned with our partners that consistency and product characterization are important. And I think our company is really set up to look at new potential technologies and new potential solutions to these problems. As partners move closer to commercialization -- and again, we're working with, as you recognized, with some of the leaders in the commercialization of cell therapy. So I think we've been kind of an inside view of what's really important.

So our sense is that guidance was -- is a good validation. There's a really important interface between industry and FDA, whether that be through bio and/or through arm or ISCT. And MaxCyte is actively involved in all those organizations to ensure that we can help to provide the standardization for the industry. So that's an investment that we quietly make and spend time, ensuring that the industry is well supported by technology providers at MaxCyte.

Max Masucci -- Cowen and Company -- Analyst

That's great. Maybe just a little follow-up there. It seems like the FDA is nudging CAR-T developers to at least attempt to lock down manufacturing methods a bit earlier in development. So just curious if that would be that nudge or that urge from the FDA would be -- could spur a tailwind for some GMP-grade closed platforms or GMP-grade PAs in the core razor-razorblade business.

And the PA portfolio is -- it's continuing to expand and round out and you do have, I believe, the three processing assemblies are being sold to both research and GMP customers. So it would be great to hear if you're seeing that shift to GMP products occurring earlier in the process and if that could be a tailwind.

Doug Doerfler -- Chief Executive Officer

Yeah. I think, you know, our view with our customers have been get involved with us early because we can provide you the same platform, the same product, the same electroporation settings, all the way through for IND-enabling studies, all the way through scalability, all the way through to commercialization. And so I think that does play well. I think we've been at the -- let's say, the forefront.

But I think we've recognized the need and the opportunity, and I think we've seized it. So I think we're in pretty good shape.

Max Masucci -- Cowen and Company -- Analyst

Great. Thanks for taking the questions. Appreciate it.

Doug Doerfler -- Chief Executive Officer

Thanks, Max.

Operator

Thank you. [Operator instructions] Our next question comes from the line of Mark Massaro of BTIG. Please go ahead.

Mark Massaro -- BTIG -- Analyst

Hey, guys, thanks for the question, and congrats on the strong end to the year. I guess your business is nice and stable. You signed four SPLs in 2021, one here in '22. I think at the time of the IPO, you talked about a goal of signing three or four SPLs per year.

Are you still confident you can sign three or four this year? And I guess what I'm really trying to get at is just your comfort level in your funnel near term.

Doug Doerfler -- Chief Executive Officer

Well, the funnel has never been stronger. It continues to strengthen. I think that's evidenced by the strong quarterly quarter-over-quarter growth in cell therapy. Again, that builds pipeline for the SPLs.

We don't control the SPLs, obviously. That's something that we have to do with a partnership. But we see no reason why the dynamics are changing in a negative way for us. I don't think we've provided any further guidance on what '22 will bring, although I think our track record has been pretty consistent.

And I think we've been able to sign three, four, five a year over the last several years, and that's something that we continue to work toward.

Mark Massaro -- BTIG -- Analyst

OK. Great. And -- yeah, go ahead, Amanda.

Amanda Murphy -- Chief Financial Officer

I was just going to add just one quick comment there. Obviously, these are negotiations and contracts that are long term, of course. So it's sort of hard. Again, you're putting -- not you, but putting December to a December time frame is difficult, right? But to Doug's point, we have an ever-increasing pipeline, which I think has been driven by a lot of things, especially just the clinical support that we continue to build with the master file and that type of thing.

So just to reiterate that point. And I -- we can go through the numbers off-line in terms of historical signings. But again, we still have the same comment around the pipeline being really strong and building. So --

Mark Massaro -- BTIG -- Analyst

OK. Yeah, that's encouraging. I guess, as analysts, we see that there's been a little bit of a shift in capital market dynamics in the last several months. Some of your customers admittedly are start-ups.

So would just be curious to ask about access to cash, access to capital, and whether or not you're seeing any softer demand from some of your customers as it relates to maybe some customers trying to preserve capital.

Doug Doerfler -- Chief Executive Officer

Well, I think, you know, what they're working on with us is probably central to what their business model is all about, right? I mean -- right? So if they're working on a product that's in -- going toward a pivotal, they're probably not going to be backing away from that from an investment perspective. So we're -- we obviously track the cash that our partners have. But we're not seeing any softening in demand based on their cash needs or their cash end dates. We do pay attention to that, of course.

Amanda Murphy -- Chief Financial Officer

And another thing, just to kind of wrap up both of your questions, we're also not seeing any change in the economics as it relates to the partnerships. So as you said, they've been fairly consistent in terms of the pre-commercial sales retainment structure. So just to kind of tie both your questions together, we're not seeing any change there either.

Mark Massaro -- BTIG -- Analyst

Yeah. OK. That's great. And then if I can ask one last one.

You've talked about the VLx really being additive into new indications like monoclonal antibodies and viral vector production. So I think you've addressed this before, but is it safe to say that you're not expecting customers to return ATx, STx, GTx in exchange for the VLx? So any comments about that? And I know it's early days now, but curious if you could just speak to that over the next year or two.

Doug Doerfler -- Chief Executive Officer

I don't see this as cannibalizing any of those products. In fact, I think it's just going to be the opposite. When you talk to these customers in bioprocessing, the VLx is actually a scaling down of their process to some extent. They're working in thousand, a few thousand legal bioreactors that are scaling down.

And as they scale down, they'll want to have even more flexibility at the lower end to do their design and experiment. So I -- we're -- at least my optimistic view, my pragmatic optimistic view is we're going to not see cannibalization. We're actually going to see more opportunities because now these companies will be able to convince the process development folks on the larger-scale side that they can move from the STx or the VLx. And that will, I think, open up, frankly, new opportunities for the STx and the GTx in these companies because there'll be more products that they can develop knowing now that they can scale up even further with the VLx, if that makes sense.

Mark Massaro -- BTIG -- Analyst

Yeah. That makes perfect sense. All right. Thanks, guys.

Doug Doerfler -- Chief Executive Officer

Thank you all. And I just -- thank you again for all of your participation in today's call and your interest in MaxCyte. Great questions, and I look forward to talking to you all individually. Thank you very much.

Operator

[Operator signoff]

Duration: 58 minutes

Call participants:

Sean Menarguez -- Investor Relations

Doug Doerfler -- Chief Executive Officer

Amanda Murphy -- Chief Financial Officer

Jacob Johnson -- Stephens Inc. -- Analyst

Julie Simmonds -- Panmure Gordon -- Analyst

Paul Cuddon -- Numis Securities -- Analyst

Dan Arias -- Stifel Financial Corp. -- Analyst

Matt Larew -- William Blair -- Analyst

Max Masucci -- Cowen and Company -- Analyst

Mark Massaro -- BTIG -- Analyst

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