Horizon Discovery Group plc 2017 Full Year Results May 2018
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Horizon Discovery Group plc 2017 Full Year Results May 2018
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2
Our next generation tools power the ecosystem of precision medicine
INSPIRED CELL SOLUTIONS
We are global leaders in cell Our vision is to unlock the Our advanced tools accelerate
engineering. power of the cell. customer solutions.
We innovate with our customers using The cell is at the heart of biology. Our Our unique tools and services are used by
our unique technology agnostic platform ability to modify the cell helps customers to provide valuable insights
that allows us to control the cell using customers understand biology and and applications in:
our expertise in: translate knowledge into valuable
industrial applications. - research
- gene editing - drug discovery
- gene modulation - molecular diagnostics
- biomanufacturing
3
Unique position
to deliver growth
Unique position to deliver growth…
• World class technology agnostic gene editing and modulation platform
• Innovation is driving from traditional approaches to the next wave of precision medicine
• Next generation tools and technologies delivered through valuable customer relationships
• “Blue ocean” markets with limited competition in fast growing core focus areas
…through an outstanding team and full capability
• Exec • Global commercial footprint, • Innovation and • Supply chain logistics and
leadership eCommerce and distribution science base operations
4
Major growth drivers
We expect to gain share in key markets
GMP Cell Solutions:
Bioproduction, vaccines, cell therapy APPLIED PRODUCTS
Market size: £250-350m CAGR: 10-15%
Diagnostic Solutions:
Reference standards for oncology, NIPT and APPLIED PRODUCTS
infectious diseases
Market size: £450m CAGR: 10-15%
Research Reagents and Models:
CRISPR, RNAi, cells, transgenics RESEARCH PRODUCTS
Market size: >£1,000m CAGR: >25%
Screening Solutions:
CRISPR and combination screening SERVICES
Market size: £450m CAGR: 15-20%
5
Source: Served Addressable Markets and Market Share based on management estimates
Financial
highlights
2017
Revenue Funding
£80m fundraising
£36.5m
•
Revenue growth driven by products
£28m
•
• £37.5m cash consideration for
• Gross margin expansion to 62%
52% growth acquisition
(FY16: 54%)
• £28m net funds to support growth
50% constant • Organic revenue £27.5m (14%
currency growth)
EBITDA Outlook
• Solid Q1 with revenue tracking to
£1.1m • Positive EBITDA (adjusted) from core expectations and positive outlook
Core EBITDA •
products and services
£2.8m negative EBITDA in leveraged
R&D with planned reduction in
Q1 • Expect typical H2 weighting of
revenue with corresponding phasing
(adj) of EBITDA
forward net investment • Drive to sustainable, profitable
growth
6
Operational
highlights
• Dharmacon tracking towards
• Completed consolidation into UK
return to growth
Centre of of Boston and Vienna sites
Dharmacon • Integration progressing well
• Commercial and operational Excellence forming world leading Centre of
Excellence
synergies evident
• Deepening of core gene editing
Corporate • Terry Pizzie appointed Group CEO Core gene capabilities
Delivery from a world class team • Transposon licence
and •
• Expanded geographical coverage editing • CRISPR licence expansion for
Commercial • Enhanced e-commerce capabilities GMP and to have products made
and sold by partners
7
Commercial 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 ‘Customer
Key Account • Web driven knowledge for
Strategy 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
Cross selling Service
Technical
Support
O’Brien
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
8
Customer intimacy through commercial coverage
From… From… …to
LEGEND
BD
Emile Shaffu - S. UK, N. Ireland &
Ireland
LEGEND Iceland
Abhay Joshi - N. UK
EMPTY
Switzerland (Open)
Emile Shaffu
Ron Evers
Laura Defranco
Andreas Myer - S. Germany Finland
Finland Daniella Huber - N. Germany Sweden Europe
Small and specialised Horizon team with large
Sweden Europe
Nordics (Open)
•
Norway
Norway Fabienne Tardieu
Rainer Halama
LD Jon Seager Open
Latvia
Latvia
Lithuania
Denmark Ireland
territories and limited customer relationships
Lithuania UK
Ireland
AJ
UK Netherlands Belarus
Belarus DH
ES RE Poland
Poland Germany
Germany
Ukraine
Belgium Czech
Ukraine
ES Czech Luxembourg AM Rep
Rep Slovakia
Luxembourg Slovakia Moldova
France RH
France Moldova Austria Hungary
Austria Switzerland
Switzerland Hungary FT Romania
Larger Dharmacon team with smaller territories
Slovenia
Slovenia Romania Liechtenstein Croatia
Liechtenstein Croatia
• Portugal
Spain
Italy
Serbia
Bulgaria
Portugal
Spain
Open
Italy
Serbia
Bulgaria
Greece
Greece
and deeper relationships in academia
WA
MT
ND
ME
Commercial
…to
OR
MN
coverage
ID
SD WI
NY
WY MI
IA PA
NE NJ
NV OH MD LEGEND
UT IL IN
CO WV BD
CA
VA EMPTY
KS MO
KY Ashleigh Teator
Teams merged and sell pan-portfolio for broad
NC
TN
•
AZ OK
NM AR
AT SC British Columbia
MS AL GA
Sasketechawan, Manitoba
WA
TX LA
MT ME
FL ND
geographic coverage and cross-selling
AK Quebec, Ontario
OR
MN CN
ID
SD WI
NY
Products
Opn
WY JM MI CT RI
AP
IA PA
NE MC NJ
HI
NV OH MD
Opn UT IL IN
CO WV
CA
opportunities
DC VA Darrick Chow
KS MO
JD KY Ashleigh
WA
NC JM O
TN J
MT ME
ND AZ OK
NM AR Ham
SC
OR AT Jam
MN
ID MS AL GA Mini C
SD WI
NY An
WY MI TX LA Cha
IA PA
Technical specialists covering office based training
NE NJ HS Ji
NV OH FL
MD LEGEND AK Kei
•
UT IL IN
CO WV BD Larry
CA
VA Hamidah Sultan
KS MO
JD KY Jeff Dale
NB NC Nathan Bach
TN
AZ OK HI
NM AR
SC
as well as field application specialists in situ to
MS AL GA
Products and services
TX LA
HS
FL
AK
support commercial organization HI
Services
9
Who 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
10
Note: illustrative analysis based on pro forma full year revenues for DharmaconRevenue growth
Revenue and gross margin by customer segment Revenue by region
40.0 80% 40.0
35.0 70% 35.0
4.5
30.0 13.7 60% 30.0
25.0 50% 25.0
10.3
20.0 40% 20.0
10.2
15.0 30% 15.0
10.0 20% 10.0 21.6
5.0 12.6 10% 5.0
0.0 0% 0.0
FY15 FY16 FY17 2015 2016 2017
Research products Applied products Services Americas EMEA Asia Pacific
Product GM% Services GM%
• Group revenue of £36.5m (52% growth, 50% at CER) • Dharmacon accelerating our globalisation
• Organic revenue of £27.5m • Strong performance of applied products in APAC
• Product revenue of £22.8m (101% growth, 101% at CER) • Significant increase in commercial coverage expected to drive
• Services revenue of £13.7m (7% growth, 4% at CER) growth in all regions
• Gross margin increase to 62% following site consolidation
11Foreign exchange
Revenue by currency FY17 GBP:USD
1.5
USD tailwind USD headwind
1.45
CC growth
1.4
50% 1.35
(11% organic) 1.3
1.25
1.2
1.15
FY16 FY17 Q1
1.1
Jan-16
Jan-17 Jan-18
• £36.5m reported revenue (£36.0m on a constant currency basis)1
• Significantly increased exposure to USD following Dharmacon acquisition in September
• To date the group has focused on natural hedges and this will be kept under review in FY18
• FX headwind within FY172
• Continued exposure to GBP:USD movements in FY18
• Strong Q1 2018 revenue despite FX headwind
1 Based upon average monthly exchange rates for FY16 2 Based upon the start of year exchange rate
12Research products
Market: £1,000m, CAGR >25% (gene modulation reagents CAGR 4-8%)
34%
Customers: Life science researchers FY17
Offerings: Engineered cells, RNAi, CRISPR reagents, libraries, in vivo models Mix
Price and channel: £50 to £5,000+ at high volumes primarily through eCommerce
FINANCIAL HIGHLIGHTS COMMERCIAL HIGHLIGHTS
• Leading high-quality catalogue of cell lines for use
Revenue GM Growth in academic and biopharma research and product
£12.6m 64% 220% development
FY16 FY16 At CC
£3.9m 68% 224%
• eCommerce platform delivery
• Revenue growth accelerated by Dharmacon acquisition • Commercial team coverage and cross selling across
• Organic revenues of £3.6m (FY16 £3.9m) as large cell line
geographies
library deal in FY16 did not recur
• Underlying transactional growth encouraging and starting to
see synergy with Dharmacon portfolio
TARGET FINANCIALS: High single digit growth NOW INCLUDING DHARMACON…
13Research products: Dharmacon
INTEGRATION PROGRESSING WELL
• Kim Nichols appointed as Head of Global Operations
• Integration progressing to plan and business performing well
• Extraction of EU logistical operations from GE successfully completed post-period
• Post-acquisition integration continues to deliver synergies enhanced by commercial team territorial coverage
FINANCIAL HIGHLIGHTS COMMERCIAL HIGHLIGHTS
Revenue GM • Expansion of fast-growing CRISPR reagent product
£9.0m 63% line through the launch of Edit-RTM CRISPRa
FY16 FY16
reagent platform for genome-wide CRISPR activation
£27.2m 1 56% 1
• Reinforcement of market leadership in gene
modulation, through functional guarantee on Accell
• Dharmacon consolidated from 1 September 2017 and fully
siRNA
included in research products
• Revenue tracking towards return to growth • Outlicensing of RNA therapeutic IP
• Gross margin expansion to 63% helped by IP synergies • Pick up across all geographies in Q1 2018
• Contributing profitability and cash generation
1 Source: Dharmacon’s 2016 carve-out financials derived from GE’s consolidated US GAAP financials, including IFRS adjustments and using GBP:USD
14
of 1.3512 for the 2016 calendar year (unaudited)Applied products
Market: £700m, CAGR 10-15%
Customers: Manufacturers and Diagnostics FY17
Offerings: CHO cell plus licence, Reference standards Mix
Price and channel: Biop >£150k, MDx OTS (£10k) 28%
FINANCIAL HIGHLIGHTS COMMERCIAL HIGHLIGHTS
• Post period successful customer IND filing expected to
Revenue GM Growth significantly expand addressable market
£10.2m 74% 38%
FY16 FY16 At CC • Bioproduction customers moving direct to commercial
£7.4m 76% 36% licences
• Bioproduction revenue £5.2m at 79% gross margin delivered strong • Strong growth in USA and China
performance
• MDx revenue £5.0m at 70% gross margin showed continued growth • Reference standard market impacted by change in FDA
in our MDX OTS business including sales direct to CLIA labs driven by
regulation indicating CLIA labs should be self-regulating.
FDA regulation; lumpy OEM revenue in FY16 did not recur in FY17
Seeing success in selling direct.
TARGET FINANCIALS: Double digit growth
15Services
Market: £450m, CAGR 15-20%
Customers: Biopharma discovering targets and validating precision medicines 38% FY17
Offerings: Custom model generation, application of products to generate data Mix
Price and channel: >£5,000 (FTE based) sold through bus dev and key accounts
FINANCIAL HIGHLIGHTS COMMERCIAL HIGHLIGHTS
Revenue GM Growth • 96% cell line engineering project success rate
£13.7m 54% 7%
FY16 FY16 At CC
£12.8m 40% 4% • First to market launch of Genome-Wide CRISPRi and
CRISPRa screening which are in high demand
• Gene engineering services grew strongly, particularly in vitro
• Increasing focus to grow in vivo through increased coverage • High level of customer satisfaction and repeat
and new specialist sales business in Assay Services
• Good growth in applied services, particularly Molecular
Screening
TARGET FINANCIALS: Double digit growth
16Re-evaluated leveraged strategy
• Emphasis now on driving core tools business
• Research biotech activity now de-emphasised
• Leveraged strategy based on
• Core innovation, particularly gene editing
• Powerful translational science base
• Deep network of scientific key opinion leaders
• Partnerships with innovative customers
• Capabilities that sustainably drive our core
Progress to date
• Monetising existing portfolio through
• Outlicensing of shRNA therapeutic targets
• IP out-licensing
• Partnership discussions with respect to validated
• Partnering of existing therapeutic targets
targets
• Paid for partnerships with upside
• Avvinity making continued progress with a view to
• Third party funding
securing third party funding
17Trading analysis
FY17
EBITDA bridge
Products and services RBU
Products and Exceptional Site Products and Research Total
Services Items Closures Services Biotech £'000
(reported) (add back) (add back) (adjusted) (reported) (reported)
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 36,510 36,510 36,510
Cost of Sales (13,824) (13,824) (13,824)
Gross Profit 22,686 22,686 22,686
62% 62% 62%
Opex (32,949) 3,708 2,524 (26,717) (3,353) (30,070)
Depreciation and amortisation 5,175 5,175 526 5,701
EBITDA (5,088) 3,708 2,524 1,144 (2,827) (1,683)
• EBITDA positive core business before exceptionals and site closures with Exceptional items
positive trend through Q4
• Net investment in leveraged R&D of £3.4m Exceptional items FY17
• Site closures of £2.5m related to consolidation of Boston and Vienna
sites into UK Centre of Excellence with benefit to be felt in FY18 Acquisition costs £2.6m
• FY18 EBITDA expected to be weighted towards H2 due to revenue Restructuring costs £1.1m
phasing
• Exceptional items expected in FY18 related to CEO change and TOTAL £3.7m
integration costs
• Tax credit of £4.7m includes offset of losses against Dharmacon profits
18Strong balance sheet
FY17 FY16
£'000 £'000 Acquisition accounting
Audited Audited
FY17 £m
Goodwill 73,831 35,873
Identifiable assets acquired 28.0
Intangibles 52,742 16,241
Property, plant and equipment 13,059 12,025 Goodwill and intangibles 42.0
Investments 1,859 2,238 Consideration 70.0
Other 433 433 Satisfied by
Non-Current Assets 141,924 66,810 Cash 38.1
Equity 31.9
Inventories 2,573 1,955
Trade and other receivables 20,584 12,568
Cash and cash equivalents 28,084 6,071 Commentary
Current Assets 51,241 20,594 • Acquisition of Dharmacon increased goodwill and intangible assets by
£42m
Current Liabilities (11,552) (8,701)
Net Current Assets 39,689 11,893
• Lean working capital shows benefit of scalable business model
Non-Current Liabilities (10,456) (813) complemented by Dharmacon
Net Assets 171,157 77,890 • Accounts receivable increase due primarily to high Q4 revenues and
settlement of TSA balance with GE (since received)
Equity 171,157 77,890
19Cash flow
FY17
£'000
FY16
£'000
Cash flow £m
Audited Audited
Net acquisition costs (37.5)
Operating activities (13,871) (8,151)
Net funds raised 77.6
Acquisition of subsidiaries (37,519) (418) Capex (2.3)
Acquisition of investment in joint venture - (2,571)
Intangibles (1,725) (2,733) Intangibles (1.7)
Property, plant and equipment (2,338) (5,679) Operating cash (13.9)
Interest (621) 38
Investing activities (42,203) (11,363)
Financing activities 77,572 141
Commentary
Cash flow 21,498 (19,373) • £78m net placing less £38m cash consideration for Dharmacon
Cash b/f 6,071 25,067 • Reduction in one time investing activities and focus on integration
Forex 515 376
• £28.1m net cash provides robust funding position to drive organic growth
Cash c/f 28,084 6,070
20Summary
Summary and outlook
Significant progress in 2017
• Solid financial growth; operational efficiencies and cost control
measures to drive future sustainable, profitable growth
• Transformational Dharmacon acquisition; £80 million financing
• Strengthened commercial and operational functions
Trading and outlook
• Strong start to the year in line with Board expectations, despite FX
headwind
• Revenues expected to be second half weighted as in prior years
• Terry Pizzie appointed as Group CEO
• Clear forward vision and strategy being executed by a strong team
22We welcome any questions you may have
23Progress against our strategy
1 2 3
“Harness the power of “Repeatability” “Global leadership”
the cell” Deliver a repeatable, Convert early market
Become the go-to scalable business model advantage to global
provider of IP rich cell based on visible and leadership in order to
engineering solutions predictable revenue deliver growth potential
1. Global presence driving new 1. Increased commercial scale 1. Dharmacon integration
brand with clear strategy centred driving growth progressing well and delivering
on the cell 2. Beginning to see cross selling commercial and operational
2. Re-evaluated leveraged strategy across research products synergies
beginning to deliver value 3. Increased depth of core capability 2. Significant progress in APAC
including IP outlicensing is contributing to sustained and through distributors and new
3. World class innovation to drive profitable growth Japanese entity
next generation capabilities
25Technology 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 26Unique 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 Genome Editing Global Market-Forecast to 2022 4 US, UK and EU 27FINANCIAL DYNAMICS
Driving 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%
Applied products
Products
12 month gap
Applied
Products
• Partially linear and visible bioproduction and OEM diagnostic revenue
Applied
c50%
• Increasingly linear OTS as repeatable model develops
12 month gap
Research products
• Linear and predictable transaction revenue
Research
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
28COMMERCIAL
Increasing effectiveness
Management • Highly experienced Management team
embedded
Key Account Partners
• Key Account Sales approach established
Business Development
• Increased Business Development sales
Asia Pacific coverage boosting customer intimacy
eCommerce
• Refocused to solution selling
• Integration of Dharmacon commercial
Marketing
functions
Customer Support • APAC distributor partners refined and
coverage expanded
Feb 17 Feb 18 Jul 18 Dec 1830
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