Horizon Discovery Group plc
Half Year Trading Update
- Business
remains robust with sustained recovery to 2019 levels as demand for
Horizon’s products and services remains high
- Group is
confident of a return to growth in H2 2020
- Capital
markets webinar 15:00 BST today – dial in details below
Cambridge, UK, 29 July
2020: Horizon Discovery Group plc (LSE: HZD)
("Horizon", "the Group" or “the Company”), a cell engineering
company focused on commercialising the application of gene editing
and gene modulation to accelerate scientific innovation and
biopharmaceutical drug development, today provides an unaudited
pre-close trading update for the six months ended 30 June 2020. The
Company plans to report its half year 2020 results on 17 August
2020.
Financials
Horizon expects to report half year 2020
revenues of approximately £22.4 million (HY 2019: £26.1 million, c.
-13.9%)1, approximately £22.0 million (c. -15.5%) on a constant
currency basis. The change was largely due to the rapid reduction
of academic research work caused by the COVID-19 pandemic impacting
the Group’s Research Reagents business unit and was broadly in line
with Board expectations. The greatest impact was seen in the second
quarter of 2020, most notably in April. This was then followed by a
period of sustained recovery, which resulted in large parts of the
business regaining momentum and returning towards 2019 levels of
revenue by the end of June 2020.
Gross margin from continuing operations1 is
expected to be approximately 66.0% (HY 2019: 71.2%). The margin
decline is primarily due to the impact of COVID-19 on manufacturing
costs and additional provisioning for aged inventory. Adjusted
EBITDA is expected to be a loss of £4.6 million (HY 2019: £0.0
million1).
The Group’s cash position was bolstered by a
successful Placing in April 2020, which raised £6.9 million in
gross proceeds, and was further strengthened by the implementation
of enhanced cash control measures implemented in April. Taking this
into account, the Group had cash and cash equivalents of £23.6
million as of 30 June 2020 (HY 2019: £24.8 million; FY 2019: £18.8
million). The Group’s strong balance sheet provides financial
flexibility to ensure operational delivery and continued strategic
investment to fully benefit from market recovery.
1. In December 2019, the Company completed its
divestment of its non-core In Vivo business unit to Envigo RMS
LLC. Revenues generated in the period in the financial year
that the Company owned In Vivo are excluded from the Company’s
continuing operations
Terry Pizzie, Chief Executive Officer of
Horizon Discovery, commented:
“Thanks to the fantastic efforts of our staff,
we have continued to operate effectively throughout the crisis and
have built stronger and deeper relationships with our biopharma
customers based on our ability to add value in difficult
conditions. Our customers have increasingly adopted outsourcing as
a
solution to their own business challenges and we
have become recognised as an invaluable long-term partner.
“We expect the trend for increased outsourcing
to continue, for these relationships to endure and facilitate high
level access within our biopharma customer base that will help lay
the foundations for commercialising our new high growth areas.
“We are encouraged by our H2 2020 prospects and
look forward to the remainder of the year with optimism and
confidence about the Group’s strategy and prospects.”
Performance by Business Unit
Research ReagentsRevenue for
the Research Reagents business was £16.0 million, down 15.3%
against the same period in the prior year, with trading
significantly impacted by COVID-19. Academic and government
research labs account for approximately 50% of the Research
Reagents business unit’s revenues, and the closure of many of these
facilities starting from mid-March, led to a rapid reduction in
orders for RNAi and CRISPR reagents and cell line products.
In April, revenues for reagents reduced to a low
of 56% of the same period in 2019. Trading started to improve in
May as researchers began to return to work and, by the end of June,
trading had recovered to 2019 levels.
As a result of the repositioning of the Group’s
Cell Line Engineering (CLE) business, with a new value proposition,
pricing and go-to-market strategy introduced at the end of Q1 2020,
demand has increased significantly in Q2. This is not yet reflected
in the reported revenues as a result of c. 10-week project delivery
and revenue recognition timelines. Given the significant increase
in demand, the Group has committed to additional investment in lab
equipment and automation of approximately £3.5 million over the
next 18 months, to further increase capacity to levels 25 times
those of January 2019. To conserve near-term cash, this investment
will be largely funded through leasing equipment. More detail on
this will be provided at the Group’s half year 2020 results. In H2
2020, the Group also expects to benefit from demand for CLE from
academic and government research, as most researchers return to
work following the loosening of lock-down restrictions.
For the first time, the results for this
business unit now include Diagnostics due to operational synergies,
including e-commerce. Diagnostics revenues were down 8.5% from H1
2019. The Group expects this part of the business to return to
growth in H2 2020.
Screening Overall revenue of
£4.4 million represented a 2.8% increase on the same period in the
prior year. In line with typical biopharma spending patterns, the
Screening business saw a relatively flat first quarter. However,
after the initial slowdown in late March, the Group saw a notable
increase in orders from its biopharma customer base, as these
companies responded to the challenges of the COVID-19 crisis by
prioritising key projects and supplementing their own in-house
resources by outsourcing both CRISPR screening and High Throughput
Screening (HTS). The Group expects the trend for outsourcing to
continue in H2 2020.
BioProduction Overall revenue
of £2.0 million for H1 2020 was down 29.7% on the same period in
the prior year, with revenues suffering from the impact of COVID-19
restrictions and changes of prioritisation within bioproduction
facilities globally, resulting in delays to evaluations of our CHO
cell line. Pick-up in activity in May and June indicates a
potential road to recovery in H2 2020.
The Group remains excited about its
collaboration with Mammoth Biosciences and the development of a
suite of next generation engineered CHO lines as these initiatives
are progressing well.
Base Editing After establishing a new Base
Editing business unit in H1 2020, the Group has making good
progress working with its early access customers, including a large
global pharma company, to assess and shape the development of this
technology. The Group believes this technology is well-positioned
to benefit both the CAR-T therapy market and the gene therapy
market.
Supporting COVID-19
Research
Horizon’s products and services are being used
by our customers in several important areas of COVID-19 research,
including in efforts to uncover the virus’ weaknesses, find targets
for potential therapies and help guide vaccine design. The Group’s
RNAi and CRISPR reagents are being used by high profile
organisations such as the Krogan Lab, based at University of
California San Francisco. Nevan Krogan, PhD, Professor of Cellular
Molecular Pharmacology at UCSF, who leads the facility, has cited
Horizon’s ability to be quick and flexible in meeting the
laboratory’s needs for CRISPR and siRNA reagents as being
instrumental in the rapid progression of its COVID research.
Outlook
The fundamental drivers and demands for
Horizon’s products and services remain strong and the Group is
confident of a return to growth in the second half of 2020. Horizon
remains focused on executing its strategy, and the management team
is excited about the continued expansion of its screening market
and the opening-up of new high growth areas that will come from
commercialising its investments in BioProduction and Base
Editing.
Horizon’s strong balance sheet position provides
financial flexibility to ensure operational delivery and continued
R&D investment to fully benefit from market recovery. The Group
will continue to prudently manage the business, ensuring
operational delivery and focused investment in order to be in a
strong position as markets normalise.
Ends
Capital Markets Webcast and conference
call today:
Horizon Discovery will host a Capital Markets
Webinar for institutional investors and analysts at 15:00pm BST.
There will be a simultaneous live conference call. The joining
instructions are as follows:
Webinar link:
https://www.lsegissuerservices.com/spark/HorizonDiscoveryGroup/events/4ab97991-3d5b-45de-959b-9486da1e2d60
Conference call details for analysts and
investors:
- US Participant International US-Toll Dial-In
Number: (918) 922-6506
- UK Participant Local Dial-In Number: 020 3107
0289
- Conference ID: 7136716
The webcast and presentation slides will be
available on the Group’s website shortly after the event:
https://horizondiscoveryplc.com/news-events/presentations-and-recordings/
For further information from Horizon
Discovery Group plc, please contact:
Horizon Discovery Group
plcTerry Pizzie, Chief Executive OfficerJayesh Pankhania,
Chief Financial OfficerJon Davies, Head of Investor RelationsTel:
+44 (0) 1223 655 580
Numis Securities Limited (Broker and
NOMAD)Freddie Barnfield / Duncan MonteithTel: +44 (0) 207
260 1000
Consilium Strategic Communications
(Financial Media and UK Investor Relations)Mary-Jane
Elliott / Matthew Neal / Melissa GardinerTel: +44 (0) 20 3709
5700Email: horizon@consilium-comms.com
Zyme Communications (Trade and Regional
Media)Lorna CuddonT Tel: +44 (0) 7811 996
942Email: Lorna.cuddon@zymecommunications.com
Westwicke, an ICR Company (US Investor
Relations)Stephanie CarringtonTel. +1
646-277-1282Email: horizondiscovery@icrinc.com
About Horizon Discovery Group plc
www.horizondiscovery.com
Horizon Discovery Group plc (LSE: HZD)
("Horizon") is a cell engineering company focused on
commercializing the application of gene editing and gene modulation
to accelerate scientific innovation and biopharmaceutical drug
development. Horizon’s portfolio of tools and services is built on
decades of experience in altering the expression of genes across
mammalian and human cell types to provide cell engineering tools
and services to customers in three key areas of the therapeutic
ecosystem: basic research, drug discovery and development and
therapeutic applications. Horizon’s offerings support and enable
critical elements of the drug development and therapeutic value
chain, particularly in the area of precision medicine. Horizon’s
customers include biopharmaceutical and diagnostics companies,
contract research and manufacturing organizations and academic
researchers across the globe.
Horizon is headquartered in Cambridge, UK with
offices in USA and Japan. The Group is listed on the London Stock
Exchange's AIM market under the ticker HZD.
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