Horizon Discovery Group plc 2018 Half Year Results September 2018
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Horizon Discovery Group plc 2018 Half Year Results September 2018
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2
Enabling the future of cell based research The cell lies at the heart of everything we do. Our ability to design and engineer a cell’s DNA to mimic that of a patient creates valuable insights into the genetic drivers of disease, its diagnosis and ultimately treatment.
We strive to be at the forefront of discovery.
Inspired cell We are experts in gene editing and gene
solutions modulation, with extensive practical experience
across CRISPR, rAAV, ZFN, Transposon and RNAi
technologies.
The nature of drug discovery is rapidly
Our core cell line engineering experience comes
evolving and so are we. We are now from over 4000 gene modifications completed
the go-to cell engineering experts, across 100 cell types.
enabling the global life science
community. Our IP position facilitates our technology agnostic
approach to successfully meeting the needs of
customers.
Business highlights
• Appointment of new CEO • New CRISPR screening
• Five year investment strategy agreements with major
Leadership implemented Commercial pharma including
• Embedding executive AstraZeneca
leadership team • £1.1m bioproduction license
• Integration of Dharmacon
• 5+ new product launches,
now substantially complete
across the portfolios
ahead of schedule
Innovation • Out-licensing ‘Helitron’ gene- Operational • Extended global reach,
editing technology
including set up of Japan
• Successful IND filing
office
5
Financial highlights
Revenue Gross margin
• £25.1 revenue (£27.3m at CC) • 63% gross margin
£25.1m • 107% growth, driven by 63% • Strong contribution from
products applied products
• Dharmacon growth of 5.4% • Full period effect of
(£14.0m) Dharmacon
Cash Outlook
• Strong start to H2
• £24.9m: robust cash position
• Second half weighting of
£24.9m • Significant reduction in Trading revenues
operating cash outflows
• Revenue slightly ahead of
• Cash available for investment
market expectations
6
6
Strategy evolution
Market analysis
• Implementation of 5-year investment strategic plan for top-line growth
• Rapidly changing market as gene editing and gene modulation drive the next wave of
precision medicine
• Cell engineering becoming embedded at industrial scale into customers’ core workflows
• Horizon uniquely positioned to capitalise on rapidly increasing market demand via our
scientific and commercial leadership
• Prioritisation of major growth drivers in highest value core markets
8
Innovation waves
Speed of change is increasing
Customer needs are evolving
- rapid hypothesis testing
Technological change
- speed and capacity constraints
- expertise and convenience
cell
therapies Signs of market maturation:
advanced - downward price pressure
patient CRISPR - increased customer knowledge
relevancy: screening - new technical innovations
patient data: engineered
enabling models
greater Horizon well positioned to identify
sequencing
insights early innovations to supplement its
speed & cost
human
genome existing leading technology and
capitalise on high growth markets
Patient relevance
9
*Exemplar indicative of management views on technology innovations impacting drug discovery and future opportunities
Investment criteria
Accelerate growth in key segments by delivering compelling, differentiated
solutions for customers within our repeatable and scalable business model
Market attractiveness Innovation drivers Commercial channels
• High growth segments of • Synergistic with existing
• Compelling value
sufficient size customer base
differentiation
• Aligned with core • Commercialise through
• Top tier market
technical capabilities existing channels
leadership position
• Leveraging our • Potential to reach new
• Leading R&D and global
established brand and customers or establish
facilities
proposition new channels
10High growth markets
Market Definition Growth drivers End-market CAGR
Generation of custom gene-edited cell lines. Need for greater insight into novel drug
Cell line engineering Customer driven specification, developed targets improved treatment for patients 15%
using multiple editing and modulation tools
Investment priorities
Reagents for cell line generation and The ability to (rapidly) engineer models to
CRISPR reagents screening; including knockout, inhibition and mimic diseases more effectively 15%
activation
Need for greater insight into novel drug
Functional genomic Screening platforms enabling the detailed
targets improved treatment for patients
study of gene and protein functions, pathways 20%*
screening and interactions on a genome-wide scale
Need for reliable and renewable reference
Diagnostic reference Novel cell line-derived reference materials
used to improve the reliability and validation material. Increased use of routine monitoring and 5%
standards of molecular diagnostics screening, point of care testing and liquid biopsy
GMP cell platform for manufacture of large Need for improved efficiencies to lower costs and
BioProduction molecules drugs e.g. antibodies improve margins. Economic delivery of difficult to 7.5%
produce molecule classes e.g. FC antibodies
• Remaining portfolios will focus on efficient business execution, redeploying profits into high growth areas
• Organisation structure will evolve in FY19 to align internal accountabilities with key markets
11
*Traditional HTS market growing at 12%, opportunity in FGS significantly higher. Sources: all data from external market reportsExpansion of capabilities
Building capabilities that enable rapid scalability to meet market demand in key areas.
Investment projects commenced in H2 2018 and are expected to complete within 12-24 months.
12Customer centricity
40 100 Commitment to customer experience delivering
sales reps PhDs
sustained commercial success
- coverage of BD team is building brand awareness and
90% 3k preference
closure in enquiries
48hrs per month
- focus on quality and speed of technical support and logistics
functions
18h 6 - establishing operations in Japan supports regionalisation
coverage languages strategy in APAC
- planned investments in eCommerce continue our digitization
transformation to increase customer profitability
4k 50%
shipments delivery in
per month 48h
13
*Source: internal data from CRM systemPartnership approach
Our customers are the world’s leading
academic institutes and top pharma
Key account selling model is
developing strong and profitable
relationships:
- hosted 8 ‘technology days’ with top pharma
- positioning Horizon as a preferred partner,
early in the planning cycle
- running own events “CRISPR Forum” and
“CRISPR Masterclass” to further develop
KOL and advocacy network
14Strategic outlook to 2023
Cell solutions Leadership Repeatability
- The go-to provider of IP rich - ‘Cross the chasm’; - A highly scalable business
cell engineering solutions converting early insights to based on visible and
market leadership position predictable revenues
- Commercially focused
innovation; solutions that - World class commercial - Reputation for delivery on
improve, change or help operations promise to customers,
understand the cell being the partner of choice
- An employer of choice;
- Targeted organic and attracting and retaining the - Operational efficiency
inorganic investments to best talent through automation and
build capability and market digitisation
access
15Half year financial update
Group revenue and gross margin
Revenue Gross margin
60.0
Trailing 12m revenue 70%
50.0
60% 63%
40.0 50%
40%
30.0
30%
20.0
20%
10.0 10%
0.0 0%
H2 15 H1 16 H2 16 H1 17 H2 17 H1 18 H1 16 H2 16 H1 17 H2 17 H1 18
Reported Constant currency
• Continued strong growth in applied products
Growth H1 18 H1 17 • Strong contribution from research products
Revenue 107% £25.1m £12.1m • Full period effect from Dharmacon
Revenue CC 126% £27.3m £12.1m • Organic revenue £11.1m (£12.0m at CC; £12.1m HY 17)
GM% 63% 64% • APAC growth to £3.3m (HY 17 £1.2m)
• Revenues typically weighted 40:60
17Foreign exchange
Revenue by currency HY18 GBP:USD
USD tailwind USD headwind
EUR 9%
1.5
GBP 9% 1.45
1.4
1.35
1.3
1.25
1.2
USD 81%
1.15
1.1 FY16 FY17 H1
• £25.1m reported revenue (£27.3m on a constant currency basis)1
• 81% revenue in USD, low exposure to GBP and EUR
• FX headwind within H1 18 and currently volatile
1 18
Based upon average monthly exchange rates for FY17Research products
Financial highlights Business highlights
Growth H1 18 H1 17 • Research products represent ~60% revenues
Revenue 665% £15.3m £2.0m • Return to growth in legacy Dharmacon portfolio
Revenue CC 735% £16.7m £2.0m
• Organic revenue expected to grow as effectiveness of
GM% 63% 74%
sales team cross selling increases Horizon portfolio
Trailing 12m revenue
30.0 • 25% increase in customer base for cell line products,
25.0
organic expansion of market reach
20.0
• Investment to increase capacity of cell line
15.0
10.0
engineering platform and reduce COGs
5.0 • Re-architecture of web platform commencing in Q4
-
H2 15 H1 16 H2 16 H1 17 H2 17 H1 18
Organic Dharmacon
19Research products: Dharmacon
Financial highlights Business highlights
H1 18 H1 17 • 5.4% revenue growth over H2 17 (pro forma)
Revenue £14.0m N/a • Market share gains in RNAi in all territories
Revenue CC £15.3m N/a
GM% 61% N/a
• Growth in CRISPR reagents
• Continued strong gross margin performance of 61%
16.0
14.0
• Dharmacon integration substantially complete
12.0
10.0
8.0 • H1 included significant integration activity including
6.0
4.0 ERP, supply chain and logistics
2.0
0.0 1 1 • Early completion of transitional services arrangement
H1 17 H2 17 H1 18
1 Source: Horizon combined with Dharmacon’s 2016 carve-out financials derived from GE’s consolidated US GAAP financials, including IFRS adjustments
20Applied products
Financial highlights Business highlights
Growth H1 18 H1 17 Bioproduction
Revenue 39% £4.6m £3.3m • Revenue of £1.1m with gross margins of c74%
Revenue CC 52% £5.0m £3.3m
• 30% growth over H1 17
GM% 77% 72%
• Successful Investigational New Drug (IND) filing
14.0 Trailing 12m revenue
12.0
• Budgets tend to be second half weighted
10.0 • £1.1m bioproduction license with major pharma
8.0
6.0
Molecular diagnostics
4.0
• Revenue of £3.5m with gross margins of c77%
2.0
-
• 42% growth over H1 17
H2 15 H1 16 H2 16 H1 17 H2 17 H1 18
MDx Bioproduction
• Regulatory landscape evolving
• Strong product development pipeline addressing
shifts in diagnostics i.e. liquid biopsy
21Services (including leveraged R&D)
Financial highlights Business highlights
Growth H1 18 H1 17
• Demand for gene editing services remains strong;
Revenue -24% £5.2m £6.8m investment being made to increase capacity to meet
Revenue CC -18% £5.6m £6.8m demand
GM% 53% 57%
Trailing 12m revenue • Transition from traditional screening towards high
16.0 growth CRISPR screening
14.0
• Goal to consolidate lower growth high throughput
12.0
10.0 2 year CAGR
8.0
< -10% screening and increase the automation and scalability
6.0 of high growth service areas
4.0
2 year CAGR
2.0
> +40% Post period end:
0.0
H1 16 H2 16 H1 17 H2 17 H1 18
• CRISPR screening deal with AZ and another major
pharma partner
High growth Low growth
CRISPR screening, in vitro HTS screening, in vivo gene • High quality pipeline building for 2019
gene editing, immunology editing, assay services
22Trading analysis
HY18 HY17 FY17
£'000 £'000 £'000
Unaudited Unaudited Audited
Revenue 25,112 12,101 36,510
Cost of Sales (9,241) (4,373) (13,824) Commentary
Gross Profit 15,871 7,728 22,686
63% 64% 62%
Sales and marketing (5,724) (3,961) (7,485) • Full effect of Dharmacon through the six months
Research and development (7,363) (4,222) (11,918)
Other operating income 269 415 608
Corporate (9,159) (7,040) (13,701) • Negative EBITDA before exceptional items in H1 2018 due
Depreciation and amortisation 4,027 2,240 5,701
Share of result of joint ventures (137) (218) (379)
to the phasing and mix of revenue
EBITDA before exceptionals (2,216) (5,058) (4,488)
Exceptional Items (1,583) (934) (3,708) • Opex increases expected in H2 due to invest for growth
EBITDA (3,799) (5,992) (8,196) strategy
Depreciation and amortisation (4,027) (2,240) (5,701)
Operating Loss (7,826) (8,232) (13,897) • Negative EBITDA before exceptional items for H1 18
Investment income 58 (257) (440) expected to be offset by positive EBITDA for H2 18
Loss Before Tax (7,768) (8,489) (14,337)
Tax 149 274 4,687
Loss for the year (7,619) (8,215) (9,650)
Loss per share (pence) (5.1) (8.6) (8.4)
23Summary balance sheet and cash flow
BALANCE SHEET HY18 FY17
£'000 £'000
Unaudited Audited
Commentary
Non-Current Assets 141,327 141,924
• No significant movements in the balance sheet
Working capital (net) 10,312 11,605
Cash and cash equivalents 24,867 28,084
Non-current Liabilities (9,586) (10,456)
• Normalisation of working capital balances following completion of
transitional services arrangement with GE
Net Assets 166,920 171,157
CASH FLOW HY18 FY17
£'000 £'000
Unaudited Audited Commentary
Operating activities (2,243) (13,871) H1 16 H2 16 H1 17 H2 17 H1 18
Investing activities (1,293) (42,203) Operating (3,644) (4,507) (3,629) (10,242) (2,243)
Financing activities 298 77,572 Investing (8,567) (2,796) (1,911) (40,292) (1,293)
Cash flow (3,238) 21,498 Financing 14 127 4,248 73,324 298
Cash b/f 28,084 6,071 • Strong treasury position of £24.9m
Forex 21 515 • Substantial reduction in cash outflows
Cash c/f 24,867 28,084 • Robust position to support investment for growth strategy
24Summary and outlook
• Strong first half performance
• Investment strategy to prioritise highest growth
areas in core markets
• Positive start to H2 including significant CRISPR
screening agreements and bioproduction deals
• Revenue slightly ahead of expectations for full year
26We welcome any questions
27Appendix
Technology agnostic cell engineering
Horizon is a global leader in gene editing and modulation
• We use multiple gene editing and modulation tools
• CRISPR, rAAV, ZFN, Transposon, RNA interference
• Broad and deep IP position
• Extensive practical experience that delivers results
• We are world class at editing and modulating cells
• Our cells reproduce human diseases in a laboratory setting
• Small changes to the cell drive multiples of revenue and margin
• Our solutions power precision medicine through:
• High quality research
• Increased ROI on drug development
• Improved patient outcomes 29Unique position to supply the “blue ocean” of demand
SUPPLY DEMAND
1. Repeatable and cost effective cell Commercial coverage 1. Precision medicine including
engineering using a technology healthcare economics (cost,
agnostic toolbox clinical effectiveness and patient
2. Harnessing the power of the cell in diagnostics)
areas such as Bioproduction, Dx 2. Reduced sequencing cost driving
Deep relationships
reference standards, NIPT, data that need biological answers
CRISPR screens, liquid biopsies 3. Rapid adoption of gene editing
3. Broad access to life science techniques across research and
research, drug discovery, precision applied markets
Continuous innovation
medicine and future possibilities…
48 hours 11 years
shipment to end users4 new drug to market1
>10k $2.2b
genes covered gene editing market size by 2022 2
52 31.1%
Net promoter score gene editing market CAGR3
1 Tufts Center for the Study of Drug Development 3 IQ4I Research & Consultancy Pvt. Ltd, 2016
2 4 30
Genome Editing Global Market-Forecast to 2022 US, UK and EUWho are our customers?
SERVICES RESEARCH
• Biopharma customers PRODUCTS
discovering novel targets and • Researchers using
validating new precision engineered cells, RNAi, in
medicines vivo models
MOLECULAR BIOPRODUCTION
DIAGNOSTICS • Biopharma and contract
• MDx companies requiring manufacturers using
high quality reference commercial rights to
standards to control their bioproduction CHO cell line
workflows
31
Note: illustrative analysis based on pro forma full year revenues for DharmaconCommercial excellence
Next generation technologies delivered through deep customer relationships
Relationships Web and digital
Sheli Streck
• Key to commercial innovation BD Sales • >85% Horizon enquiries
• Recruitment of key management originated online driving 67%
talent with commercial teams Brian Burke
Gabe growth in eCommerce revenue
Longhoria
fully aligned and integrated Commercial
Strategy
‘Customer
Key Account • Web driven knowledge for
Focus’
• Deepened geographic coverage Product Mgmt
Partners
customers
‘Commercial APAC Sales
• Key account team delivering Success’ • Plans to enhance customer
through deep customer ‘Business experience to increase conversion
Efficiency’
relationships John Martin
and stickiness
Customer
Elaine
O’Brien
Cross selling Service
Technical
Support
Marketing & APAC growth
eCommerce
• Increasing examples of cross Training • Experienced Head of APAC in post
selling and upselling based out of Singapore
• Key account access driving new • Quality distributor network in
pharma opportunities place
• Moving from selling technology to • New entity in Japan
solutions • Localized support
32Customer intimacy through commercial coverage
From… From… …to
• Small and specialised Horizon team with large
territories and limited customer relationships
• Larger Dharmacon team with smaller territories
and deeper relationships in academia
Commercial
…to coverage
• Teams merged and sell pan-portfolio for broad
geographic coverage and cross-selling
Products
opportunities
• Technical specialists covering office based training
as well as field application specialists in situ to Products and services
support commercial organization Services
33CRISPR screening
• Cutting edge capability including CRISPRi / CRISPRa, with over 350 screens already completed
• Development of major customer relationships including AstraZeneca and another top 10 pharma
34Leveraged innovation
Areas of Focus
• Leveraged strategy based on powerful innovation
and translational science base
• Realising value from existing portfolio
BUSINESS HIGHLIGHTS
• Outlicensing of shRNA therapeutic targets
• Partnership discussions with respect to validated targets
• £1.4m investment into Avvinity post period end following promising in vitro data
35Driving to a balance of visible, predictable and linear revenue
with strong forward coverage
Illustrative forward
12m coverage
12 month gap Services
Services
• Relatively linear, phasing driven by biopharma buying cycles
Services
• Medium to long range visibility
c50%
Products
Applied products
Applied
12 month gap
Products
• Partially linear and visible bioproduction and OEM diagnostic revenue
Applied
c50%
• Increasingly linear OTS as repeatable model develops
12 month gap
Research products
Research
• Linear and predictable transaction revenue
products
Research
products
• Drive cross selling synergies based on customer stickiness
>80%
FY17 FY18 Linear: repeatable revenue delivered consistently throughout the year
pro forma (illustrative)
Visible: revenue tracked within our CRM
REVENUE PORTFOLIO Predictable: revenue anticipated based on consistent run rate trends
36Balance sheet Cash flow
HY18 HY17 FY17 HY18 HY17 FY17
£'000 £'000 £'000 £'000 £'000 £'000
Unaudited Unaudited Audited Unaudited Unaudited Audited
Goodwill 75,263 34,651 73,831
Intangibles 51,426 15,679 52,742 Operating activities (2,243) (3,629) (13,871)
Property, plant and equipment 12,482 11,918 13,059
Investments 1,723 2,021 1,859 Acquisition of subsidiaries - - (37,519)
Other 433 433 433 Acquisition of investment in joint venture - - -
Non-Current Assets 141,327 64,702 141,924 Intangibles (512) (551) (1,725)
Property, plant and equipment (718) (1,360) (2,338)
Inventories 2,533 2,017 2,573 Interest (63) - (621)
Trade and other receivables 18,441 10,507 20,584 Investing activities (1,293) (1,911) (42,203)
Cash and cash equivalents 24,867 4,756 28,084
Current Assets 45,841 17,280 51,241 Financing activities 298 4,248 77,572
Current Liabilities (10,662) (11,389) (11,552) Cash flow (3,238) (1,292) 21,498
Net Current Assets 35,179 5,891 39,689
Cash b/f 28,084 6,071 6,071
Non-Current Liabilities (9,586) (975) (10,456)
Net Assets 166,920 69,618 171,157 Forex 21 (23) 515
Equity 166,920 69,618 171,157 Cash c/f 24,867 4,756 28,084
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