Horizon Discovery Share Discussion Threads

[mirabeau] 23/6/2017 22:04

From today's FT (along with OXB and AGY)




Horizon Discovery

Another biotech that is seeing a rapid growth in revenues is Cambridge-based Horizon Discovery, which has become a world leader in the application of gene editing using techniques such as Crispr (clustered regularly interspaced short palindromic repeats), a cut-and-paste procedure that can be used to snip out pieces of DNA.

The company which, in the words of its chief executive, Darrin Disley, “went from IP to IPO” in 2014, is now on course to be profitable on the back of expected revenues of £30m to £35m in 2017.

It recently announced it was working with three unnamed clients on pre-clinical development of a variety of gene and cell therapy treatments in areas of high unmet medical need. The work is expected to contribute more than $2m in revenue in 2017.

Horizon is also working on cell therapy projects in areas such as immuno-oncology, autoimmune diseases, rare genetic conditions, metabolic, neurological and blood disorders.

Mr Disley says the company can help address “the biggest problem with modern healthcare”: an ageing population, suffering from diseases such as Alzheimer’s, which have a genetic basis. “We need to solve those problems if the healthcare model is going to be viable moving forward,” he adds.

Group revenue increased 19 per cent, to £24.1m, in 2016 and sales rose 25 per cent year on year in the first quarter of 2017. Horizon’s share price has climbed from 150p in June 2016 to a recent peak of 220p in May, though it has since fallen back to sit nearer 200p.

Numis Securities noted this month that another gene therapy specialist, Sangamo, had recently secured a collaboration agreement with Pfizer, with a $70m upfront payment and $475m in future milestone payments. With this deal “the potential strategic value of Horizon’s gene-editing capability is becoming more apparent”, it said.

-

[mamcw] 19/6/2017 10:51

HZD have updated the consensus analysts forecasts on their website



£32m t/o, but the consensus is still for a small EBITDA loss this year; so hopefully some room for upgrades on the basis that management achieve their much stated objective of being EBITDA positive this year.

Target share price of 226.5p

[pjj71] 02/6/2017 14:04

Looking for 110 myself

[catswhiskas] 01/6/2017 14:24

Looking for 160 here before its safe to stop peeping from behind the cushion !

[hazl] 31/5/2017 11:27

There were protests before...it was a controversial issue at one point post 833.

[hazl] 31/5/2017 11:25

I will leave individuals to make their own ethical decisions.

I was going to invest in this a while ago but opted out when I read the reality of it.
Again, I objected to the idea of companies like Pepsi-cola using the cloned cell lines as taste-receptors.
It felt to me like commoditising the most vulnerable in society.
I will not go on, and would point out that I haven't posted before about this despite the fact that I researched thoroughly and have known for some time.

IMO

[kestelmill] 31/5/2017 10:48

Btw for those who don't realise, cell lines like HEK293 are commonly used and accepted in research labs all over the world. It's not a controversial topic.

[kestelmill] 31/5/2017 10:45

Thanks for the info mamcw about CRIPSR off-target mutations. I wasn't aware of that and it highlights that HZD's model of having a suite of editing options to cover all needs is a good one.

[hazl] 31/5/2017 10:08

I personally couldn't invest in a company that sells cell-lines like

HEK 293 .

[mamcw] 31/5/2017 09:54

Interesting couple of Articles. First is from Motley Fool (Yahoo Finance):

One thing you can definitely say about Neil Woodford is that he's not afraid of taking a blue-sky risk on companies that are not yet profitable -- especially in the healthcare and biotechnology field. Horizon Discovery (LSE: HZD) is one, and though it only accounts for a tiny portion of his CF Woodford Equity Income Fund, he holds a number of similar picks.

I reckon Mr Woodford's approach to blue-sky growth is sensible. It's a very high risk strategy, and having a basket of different stocks should greatly improve your safety -- and, after all, you really only need one or two to come good.

Horizon is into the very exciting field of therapeutic gene editing, and this month told us it "has gained exclusive worldwide rights to use a novel transposon-based technology platform that will broaden Horizon's gene editing capabilities," which was co-invented by its own head of innovation. It's mainly funded by downstream royalty payments, so shouldn't impact the cash position too much in the short term.

Jam soon?

Full-year results released Tuesday revealed a 19% rise in revenue to £24.1m, including a 45% rise in product revenue to £11.3m, and a gross margin boosted to 54%. So while there's no profit yet (and none forecast for the next two years -- though losses per share should be getting close to break-even before too long), I think these figures do provide appealing promise of profits within the next few years.

There are no meaningful fundamental ratios here, but if you're prepared to take a bit of a punt, I see Horizon as having attractive potential.



The second is from a Numis note, which comments on how some of Horizon's competitors in the US (which are much more highly rated and riskier in terms of cash burn), might be about to blow up:

A story on sciencealert.com entitled "CRISPR Gene-Editing Can Cause Hundreds of Unexpected Mutations", previews an upcoming paper in the high profile Nature Methods journal by Stephen Tsang. In the paper, Tsang conducted whole genome sequencing on mice that had undergone gene editing to correct a gene that causes blindness. While the gene was indeed corrected,hundreds of other changes were noted at unexpected areas in the genome and that would not have been detected by current quality control processes. With human trials already underway in China, and soon to be initiated in the US and UK this finding raises concerns.

Horizon has long cautioned over these off-target effects of CRISPR, finding the more precise (but expensive) AAV method of gene-editing is far more precise. Each technique has its strengths,and in having access to all the key methods, Horizon is well positioned to benefit as biopharma customers seek a better understanding of the risks and benefits of the different methods.

Horizon's strategic value as a leading gene-editing company is not reflected in the current valuation with several very early-stage gene, and cell therapy companies valued at multiples of HZD. However HZD is playing the long game: in contrast to mainly US peers that are likely to suffer high rates of clinical attrition (safety/efficacy) and/or run out of money. The update on CRISPR may have serious long term consequences for this companies, but will be helpful for companies needing higher quality services, and better validated products that Horizon is renowned for.

Numis have reaffirmed their BUY stance with a 262p target share price.

[pjj71] 30/5/2017 16:32

Agree that cash/debt should be more than sufficient to see them through to some very juicy numbers...

hopefully a few new contracts over the next couple of months will see sentiment really pick-up

[mamcw] 30/5/2017 16:18

Not that concerned about cash, as company will be EBITDA positive this year and it has £8m overdraft facility in reserve. Been crunching some numbers and here's my forecasts, which confirm the huge operational leverage of an increasingly products-based company:

16 17 18 19 20
Products 11.3 16.0 22.4 31.0 40.0
Services 12.7 16.0 18.8 22.1 25.0
Total sales 24.0 32.0 41.2 53.1 65.0

GP % 54% 61% 64% 67% 68%
Gross profit 13.1 19.5 26.4 35.6 44.2

S&M costs (5.3) (5.5) (5.8) (6.2) (6.5)
Admin costs (13.3) (11.5) (12.0) (12.5) (13.0)
R&D costs (6.2) (6.5) (7.0) (7.5) (8.0)

EBIT (11.7) (4.0) +1.6 +9.4 +16.7
D&A 4.2 4.6 5.0 5.5 6.0

EBITDA (7.5) +0.6 +6.6 +14.9 +22.7


DYOR. E&OE

[mister md] 30/5/2017 15:47

Keeping an eye on cash levels
Cash and cash equivalents 6,071,000 vs 25,067,000 prior year

[mamcw] 30/5/2017 10:25

link to analysts presentation. Definitely worth a read. £32.5m revenue (mid point of guidance) @ 60% GP = £19.5m of GP = 50% growth in gross profits.

[jurgenklopp] 30/5/2017 10:02

The analyst meeting must be finished by now.

Expect a reiteration from Numis to buy with a target hopefully higher than their previous 262p.

[mamcw] 30/5/2017 09:15

Digging a bit deeper into the results, and the path to profitability seems to depend on how to interpret a couple of numbers. In particular, that the cost run rate is down by £5m in FY17. Some of this will presumably be reflected in the improved GP percentage and some in the admin expenses.

£4.2m of the £6.2m of R&D costs is negated by the non-cash items, leaving £2m to be covered. This looks very achievable out of the £5m of cost savings in FY17.

Also Q1 revenue up 25% like-for-like is good news as H2 in FY16 was disrupted by all the organisational changes. Therefore H2 like-for-like should be up much more. 25% growth gets you to £30m, so top end of range is v achievable.

So I guess I'm saying that having dug into the results, I'm more, not less, comfortable that Horizon will get to EBITDA positive in FY17.

[ayl30] 30/5/2017 07:59

Results read ok to me, happy as a long term holder

[mamcw] 30/5/2017 07:57

Products growth of at least 30% @ 70%GP gets you to revenue of at least £14.7m and £10.3m GP
Services growth of at least 15% @50% GP gets you to revenue of at least £14.6 and a GP of £7.3m.

So bottom end of revenue guidance range looks very well underpinned, with GP growth of at least 33% at the bottom end of range and nearer 50% at the top end of the range. This would certainly cover all sales and admin costs, although not sure of accounting treatment of R&D costs (being capitalised?).

Very solid results, with the promise of a very bright future.

[jurgenklopp] 30/5/2017 07:48

Results out this morning.

The future looks very promising.

[mamcw] 23/5/2017 11:49

Looks like we are going to re-test the all time highs soon.

[small crow] 22/5/2017 12:45

kestel

Only because the ST article suggests it's HZD techniques versus CRISPR techniques, as a binary, which it isn't.

[kestelmill] 22/5/2017 12:39

hxxp://www.prnewswire.com/news-releases/milliporesigma-develops-alternative-crispr-genome-editing-method-300457557.html

[kestelmill] 22/5/2017 12:37

Not sure why you've posted that from 2014 smallcrow - things are moving very quickly in gene editing.

HZD's CRISPR licence is non-exclusive and available to others. There is a huge IP-dispute going on around who owns the IP for CRISPR (in eukaryotic cells). HZD took licences from both sides. Good move.

hxxps://endpts.com/take-that-editas-crispr-therapeutics-and-colleagues-win-a-european-round-in-the-ip-tug-of-war-over-crispr/

hxxps://www.theverge.com/2017/2/15/14535032/gene-editing-tool-crispr-broad-mit-ucb-patent-dispute-ruling

On the other hand alternative CRISPR gene editing accessory proteins to Cas9 have now been discovered, e.g. Cpf1, so this can allow other players to the party and could mean that HZD need to buy other licenses, since Cpf1 has some advantages over Cas9. Seems like Editas have taken an exclusive position on Cpf1-mediated gene editing.

hxxp://www.econotimes.com/Editas-Medicine-Extends-CRISPR-Genome-Editing-Leadership-Through-Licensing-of-New-CRISPR-Technologies-457244