Eager to expand its mass spectrometry footprint into cell and gene therapy, Waters has acquired the intellectual property and other assets of a four-year-old Indiana University spinout that is years away from bringing to market its charge detection mass spec (CDMS) tech and services.
Waters says the deal for CDMS developer Megadalton Solutions, which it calls tantamount to an acquisition, will grow its mass spec capabilities to analyzing proteins and protein complexes as large as 108 Daltons (Da)—compared with the 101 to 106 range offered by conventional mass spec.
The value of the acquisition was not disclosed.
“When you think of costs for cell and gene therapy production processes, that is an excess of 50 to 60%. And if you are able to detect how many are full and how many are empty, you’re able to reduce the cost by that amount,” Waters president and CEO Udit Batra, PhD, told GEN Edge. “It’s quite an obvious application—quite a significant unmet need now.”
Megadalton’s CDMS, he said, will stretch mass spec analysis beyond the COVID-19 spike protein, into virus-like particles, as well as adeno-associated viruses (AAVs) and larger adenoviruses.
“In processing AAVs, one of the largest challenges is detection of empty versus full capsids. This technique will allow you to address that challenge quantitatively,” Batra added.
Conventional mass spec measures the mass of a molecule after converting it to a gas-phase ion. The instrument imparts an electrical charge to molecules, then converts the resultant flux of electrically charged ions into a proportional electrical current for reading by a data system that converts the current to digital information, displaying it as a mass spectrum.
In CDMS, the mass of an individual ion is determined from simultaneous measurements of each ion’s mass-to-charge (m/z) ratio and charge. Advantages over conventional mass spec include no upper mass limit, no mass discrimination, and the ability to analyze complex mixtures.
Waters became a strategic investor in Megadalton, and brought CDMS into its Immerse™ Cambridge collaboration lab for advanced testing and development.
Embracing CDMS
“When the team asked, ‘Should we license it or commercialize it?’ I said, ‘Look, another hobby for our researchers! You know we can’t do this,” Batra recalled. “But I read the publications, many of them are in collaboration with large pharma companies and biotech: Who are they who have these sorts of molecules in their pipelines?”
Batra embraced CDMS technology, he said, after seeing it successfully demonstrated at a workshop at Immerse Cambridge, where Waters researchers teamed up with academic, research, and industry partners. The company invited about 20 scientists to the event, with another 20 showing up as word-of-mouth spread in the Kendall Square area.
“I invited myself! It was supposed to be a technical gathering and I’d read about and I said, ‘Maybe I should just sort of understand what this is’,” Batra said. “I still remember one scientist saying, ‘all this is well and good, but can you just test what fraction of empty versus full capsids I have in my example here?’
“People actually brought samples to get tested during the demo. That clinched it for me that there was so much excitement from a customer perspective,” Batra said. “There’s an unmet need. There are a ton of publications to support the technology. We felt that this is something that we have to adopt and develop for use in wider applications and in higher volume applications.”
Megadalton’s technology is currently for research use only. Waters has three Megadalton CDMS prototypes worldwide, while it works to shrink the footprint of the instrument and develop with it associated informatics, chemistry, and services.
“It will take two to four years” for the Megadalton CDMS tech to reach the market, Batra estimated. “There’s a strong development process—maybe longer, maybe a bit less. We’re in the early stages of developing that.”
Meanwhile, Waters has begun generating a “not significant” amount of revenue from Megadalton’s CDMS tech by charging customers seeking to use the technology to test their samples.
The CDMS tech, Batra said, could potentially be extended for use in proteomics applications, though Waters has worked to repurpose its mass spec platforms for that purpose. Last year, Waters launched SELECT SERIES, a new multi reflecting time-of-flight (TOF) platform combining enhanced Desorption Electrospray Ionization (DESI) and new matrix-assisted laser desorption ionization (MALDI) imaging sources on a single MRT platform.
New technologies
Waters isn’t the first company in the CDMS space, but it is the largest to announce plans to embrace the technology.
Last November, TrueMass Spectrometry presented what it said was the world’s first commercially designed CDMS instrument at the American Society for Mass Spectrometry’s 69th annual conference, held in Philadelphia. TrueMass was founded in the Netherlands in 2020 by John Hoyes, PhD, a former Waters scientific fellow who was previously technical director at Waters Manchester. The company is now based in Rowarth, High Peak, U.K., with manufacturing facilities in Manchester, U.K.
CDMS is expected to be one of several new technologies through which biopharmas will seek to analyze larger, more complex molecules such as those in cell and gene therapy, according to Puneet Souda, managing director, life sciences, and a senior research analyst with SVB Leerink.
“We believe the steady rise of complex biomolecules will only bring about emerging standards including MAM (Multi-Attribute Monitoring) that are already becoming standards and are closely attached to the [Thermo] Orbitrap platform vs. [Waters’] own mass specs—posing a threat to uptake of instruments longer term,” Souda wrote on February 1 in a research note.
Those other standards, Souda observed, pose a threat to customer uptake of Waters’ instruments longer term.
Thermo Fisher in November launched the Orbitrap Exploris MX mass detector, offering high resolution accurate mass data for intact analysis of monoclonal antibodies, oligonucleotide mass determination, and peptide mapping, to serve customers seeking biopharma process confirmation.
“During the year, we extended the impact of our industry-leading Orbitrap platform to bring high-resolution analysis to a range of applications, including toxicology and metabolomics,” Marc Casper, Thermo Fisher’s chairman, president, and CEO, told analysts on the company’s quarterly earnings call last week.
In 2020, Thermo expanded its Orbitrap platform beyond the small-molecule focus of the Orbitrap Exploris 120 by launching the Orbitrap 240 mass spectrometers, capable of conducting both protein and small-molecule analysis. These systems can “simplify access to proteomics for nonexperts, making LC-MS-based protein identification and quantification … highly accessible in biological research,” Andreas Hühmer, PhD, senior director, life sciences research, chromatography, and mass spectrometry at Thermo, told GEN last year.
M&A priorities
Batra said the Megadalton acquisition reflects one of Waters’ three priorities for M&A—moving toward larger molecule analysis in biologic preparation.
“We already know how to do small molecule separations really well, and we’re increasingly moving towards a larger molecule space. And anything that helps us accelerate, including a better understanding of reagents, of sample prep for bio separations, is something that we would look at,” Batra said.
Also of interest to Waters, he said, was better analytical testing of biologics—the focus of Waters’ partnership of undisclosed value launched in October 2021 with Sartorius. The companies agreed to combine Waters’ BioAccord™ LC-MS System as a bioprocess analyzer with Sartorius’ Ambr® bioreactor system, with the aim of improving access to advanced quality characterization information for bioprocess scientists.
Waters’ third acquisition priority, Batra said, was accelerating the preparation and development of LC/MS assays for diagnostics and preparing samples to be injected into the LC, plus related regulatory and commercial capability.
The push toward measuring larger molecules reflects an area of growing interest among Waters’ biopharma and biomedical research customers. Last year, pharma accounted for 60% of Waters’ revenues, industrial customers 30%, and academic and government customers the remaining 10%.
During 2021, Waters saw its year-over-year sales within the pharmaceutical market jump 20% (19% in constant currency), compared with 17% (15%) for industrial sales and 7% (5%) into the academic and government markets, which have struggled with COVID-19-related shutdowns. That growth was less apparent during the fourth quarter, where Waters saw sales to pharma increase 7% year-over-year (8% in constant currency), industrial sales rise by 6% (7%), and academic/government sales grow by 4% (5%).
Waters finished 2021 with a net income of $692.843 million, up 33% from $521.571 million in pandemic-constrained 2020, on net sales that climbed 18%, to $2.786 billion from $2.365 billion.
Growth drivers
Among key growth drivers last year were an ongoing instrument replacement initiative that generated $30 million in revenue (expected to grow to $40 million this year), a 26% year-over-year jump in net sales for the TA Instruments division, and uptake of new instruments such as SELECT SERIES as well as ACQUITY™ Premier™ liquid chromatography system, Arc high performance liquid chromatography (HPLC) system.
For 2022, Waters has guided investors to full-year constant currency sales growth ranging from 5 to 7%, with currency translation expected to decrease full-year sales growth by about one percentage point. Full-year 2022 non-GAAP earnings per share (EPS) is projected as ranging from $11.75 to $12.00, up from a non-GAAP EPS of $11.20 for 2021.
In addition to continued instrument replacement, Waters expects to generate growth this year via continued new product uptake ($45 million+ in 2021), revenue from contract organizations (up about 40% vs 2019), and increasing the percentage of chemistry sales via e-commerce (which rose to 27% of consumables in 2021).
Under Batra’s leadership, Waters “has made considerable progress the last 12–18 months around solidifying its base business, transforming the organization to drive better commercial execution, and focusing on higher-growth verticals,” Brandon Couillard, an analyst with Jefferies, wrote February 2 in a research note.
Investors agreed, pushing Waters stock up 3% in the two days since the release of the Q4 numbers, above $330 at the close on February 2, before it dipped to $325.88 on Monday. The stock price is down from its 52-week high of $424.70 on September 8, 2021.
“After bagging a lot of low-hanging fruit last year, the sustainability of +HSD [positive high single digit] core growth remains the key debate, in our view,” Couillard added.