TIDMHZD
RNS Number : 7725R
Horizon Discovery Group plc
26 September 2017
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HORIZON DISCOVERY GROUP PLC
("Horizon", "the Group" or "the Company")
Interim Results for the Six Months Ended 30 June 2017
Group positioned for additional scale following transformational
acquisition of GE Healthcare Dharmacon, Inc.
Cambridge, UK, 26 September 2017: Horizon Discovery Group plc
(LSE: HZD), ("Horizon" or "the Group"), a global leader in gene
editing and gene modulation technologies, announces its interim
results for the six months ended 30 June 2017.
Highlights:
-- Group revenue increased 19% to GBP12.1 million (HY16: GBP10.2 million)
-- Significant improvement in Group gross margin to 64% (HY16: 48%)
-- Product revenues increased by 10% to GBP5.3 million (HY16:
GBP4.8 million) with gross margin expansion to 73% (HY16: 65%) and
a strong H2 pipeline in place
-- Services delivered revenues of GBP6.8 million, an increase of
30% (HY16: GBP5.2 million) with gross margin increase to 57% (HY16:
33%) as the impact of operational efficiencies are realised
-- Improvement in Products and Services Loss Before Interest,
Tax, Depreciation and Amortisation to GBP3.6 million (HY16:
GBP(3.9) million)
-- Cash balance of GBP4.8 million as of end of H1 (HY16: GBP13.0
million) supplemented post-period by over-subscribed GBP80 million
share placing on 23 August 2017
-- The Group remains eligible to receive future R&D
milestones of up to GBP208 million plus future product royalties
(HY16: GBP208 million) through its Research Biotech business
-- Post period, Horizon completed the transformational
acquisition of GE Healthcare Dharmacon, Inc. for consideration of
$85 million (comprising $50 million cash consideration and $35
million equity consideration)
Financial Summary and Guidance:
-- Based on historical H1:H2 revenue weighting (40%:60%),
combined with a strong H2 order book, the Group is on track to
achieve FY17 revenue of GBP30 million - GBP33 million on an organic
basis
-- Inclusive of the impact of the acquisition of GE Healthcare
Dharmacon, Inc. ("Dharmacon"), Horizon expects to report FY17
revenue in the range of GBP37 million - GBP41 million; Dharmacon
will be consolidated with effect from 1 September 2017
-- Full year EBITDA for the enlarged Group is expected to be
approximately break-even prior to exceptional items and
discontinued operations
-- Realisation of benefits from investments and actions taken in
prior years to optimise organisational design and operating
efficiency and to further build our commercial capability
-- Consolidation of core capabilities expected to result in a
c.5% annualised decrease in staffing costs across the Group
(exclusive of Dharmacon):
o The relocation of cell line manufacturing capabilities in
Vienna, Austria to Horizon's UK-based in vitro Centre of Excellence
with the intention to close the Vienna site by the end of 2017
o Alignment towards high-value activities with associated
headcount reductions already announced
Commenting on the interim results, Dr Darrin M. Disley, CEO of
Horizon Discovery Group, commented: "We are very pleased with our
progress in the first half of 2017, delivering consistent strong
growth as the business continues to scale, and significant margin
improvements as steps taken in 2016 to improve operational
efficiencies bear fruit.
"The acquisition of Dharmacon will be transformational for
Horizon across our markets, creating a business which is the global
leader in the application of both gene modulation and gene editing
technologies. We are delighted to welcome the Dharmacon team, and
we expect the strong commercial synergies between both
organisations to accelerate revenue growth and considerably support
the drive to sustainable profitability of the enlarged
business.
"With the acquisition and over-subscribed GBP80 million
fundraising complete, and a strong cash position in place, Horizon
now has a significant opportunity to embark on an ambitious
programme of targeted investment, aggregating the best
technologies, IP, and capabilities from around the world to rapidly
build a global powerhouse that will help drive the next century of
healthcare innovation and better outcomes for patients."
An analyst briefing will be held at 09:30am BST on Tuesday 26
September at the offices of Numis Securities Ltd., 10 Paternoster
Sq., London, EC4M 7LT. There will be a simultaneous live conference
call and the presentation will be available on the Group's website
at www.horizondiscovery.com.
Please visit the website approximately five minutes before the
conference call, at 09:25 am BST, to download the presentation
slides. Conference call details:
Conference ID: 51691413
Participant dial-in: +44 (0) 2071 928000
An audio replay file will be made available by the end of the
day on the Group's website at
https://www.horizondiscovery.com/about-us/investor-relations.
For further information, please contact:
Horizon Discovery Group plc
Darrin Disley, Chief Executive Officer
Richard Vellacott, Chief Financial Officer
Chris Claxton, VP Investor Relations
Tel: +44 (0) 1223 655 580
Consilium Strategic Communications (Financial Media and Investor
Relations)
Mary-Jane Elliott / Matthew Neal / Melissa Gardiner
Tel: +44 (0) 20 3709 5701
Email: horizon@consilium-comms.com
Numis Securities Limited (Broker and NOMAD)
Michael Meade / Freddie Barnfield
Tel: +44 (0) 207 260 1000
About Horizon Discovery Group plc www.horizondiscovery.com
Horizon Discovery Group plc (LSE: HZD) ("Horizon") is a world
leader in gene editing and gene modulation technologies. Horizon
designs and engineers cells using its translational genomics
platform, a highly precise and flexible suite of DNA editing tools
(rAAV, ZFN, CRISPR and Transposon) and, following the acquisition
of Dharmacon, Inc., its functional genomics platform comprising
gene knockdown (RNAi) and gene expression (cDNA, ORF) tools, for
research and clinical applications that advance human health.
Horizon's platforms and capabilities enable researchers to alter
almost any gene or modulate its function in human or mammalian
cell-lines.
Horizon offers an extensive range of catalogue products and
related research services to support a greater understanding of the
function of genes across all species and the genetic drivers of
human disease and the development of personalised molecular, cell
and gene therapies. These have been adopted by over 10,000
academic, drug discovery, drug manufacturing and clinical
diagnostics customers around the globe, as well as in the Company's
own R&D pipeline.
Horizon is headquartered in Cambridge, UK, and is listed on the
London Stock Exchange's AIM market under the ticker "HZD"
Chairman and CEO Review
Genomics is transforming the way that medicines are
developed
A revolution is underway in the life sciences. Drugs are being
developed to work for more targeted populations of patients based
on their specific genetic predictors and drivers of disease. On
average it costs $2.56 billion(1) and can take up to 14 years to
develop and gain marketing approval for a new drug, with the
majority of this effort associated with the impact of failures -
time and resources spent on avenues of research and development
that ultimately don't lead to a therapeutic effect in patients.
Knowledge of the genetic drivers of disease enables more focused
drug development programmes, increasing returns on investment by
lowering the development costs and timelines. Genetically-targeted
medicines promise to deliver more personalised treatments - and
even cures - for patients with both common and rare diseases.
Horizon is at the nexus of 21st century healthcare
Horizon is at the epicentre of this revolution. We apply our
gene editing toolbox to build cells that harbour or correct the
genetics of human disease. The function of these cells can be
further modulated using the capabilities brought to the business
through the Dharmacon acquisition. The applications are extremely
broad - from research tools provided to scientists exploring the
underlying biology of disease, through the use of our models by
pharmaceutical customers to develop and manufacture novel
therapeutics, to supporting the reliable diagnosis of disease
through better reference standards. Two specific applications that
promise to be crucial drivers of healthcare in the coming years are
cell therapy and immuno-oncology, both areas in which Horizon is
highly active.
Completion of Dharmacon acquisition
On 31 August 2017, Horizon completed the transformational
acquisition of Dharmacon, a global leader in gene modulation
products. Dharmacon brings a fast-growing gene-editing product
portfolio that significantly expands the Group's catalogue and
underpins Horizon's stated objective of building a profitable
business with an 80:20 products to services revenue model.
The deal creates a world leader in the building, engineering,
and modulation of cells able to provide comprehensive support for
the genomic research that underpins the life sciences. Through the
combination of the best of Dharmacon's tools and technologies,
alongside Horizon's leading science, innovation and IP and the
ability to effectively apply these technologies on behalf of
customers, Horizon is now able to offer integrated solutions that
not only enable a more complete understanding of the function of
genes in the development and treatment of disease, but also act as
a platform for the addition of further complementary products in
the future for a one-stop toolkit for genomic research and drug
discovery.
The brands and sales channels of both organisations are highly
complementary, with Dharmacon having a strong presence in academia
and government, while Horizon has a leading position with pharma
and biotech customers. The Group's combined sales and business
development teams, as well as marketing, distribution, customer and
technical support capabilities, are expected to drive commercial
efforts across a wider geographic spread and provide significant
cross selling opportunities. The deal is immediately accretive to
revenue and earnings and is cash generating, with further
opportunities to accelerate revenue growth, margin expansion via
commercial synergies, and cost savings for the enlarged Group.
The integration process is progressing smoothly and we are
pleased to report that the initial business transition phase has
been delivered successfully and the integration continues to
progress well.
Leadership in gene editing and gene modulation
The long-term success of Horizon as a world leader in cellular
genomics continues to be enhanced as we increase the breadth and
depth of our capabilities, not only through ongoing improvements in
the use of existing gene editing techniques, but also through the
development of other novel technologies. In January, Horizon
amended a pre-existing license with ERS Genomics to include the
full commercial rights for the use of CRISPR edited cell lines for
the Good Manufacturing Practice (GMP) manufacturing of
biotherapeutics, extending the Group's coverage for CRISPR to
include virtually all non-therapeutic applications. During the
period, Horizon also announced access to the exclusive worldwide
rights to a novel transposon-based technology, co-invented by
Horizon's Global Head of Innovation. The unique 'copy and paste'
mechanism used by this technique has applications in
biomanufacturing and diagnostics, and provides Horizon with
proprietary access to a gene editing tool that can be used directly
for therapeutic purposes in the area of cell and gene therapy.
The acquisition of Dharmacon expands Horizon's leadership to
gene modulation, enabling not only the powerful permanent changes
to genes enabled through gene editing, but also transient changes
to gene function that support additional lines of research into the
underlying biology of disease and the development of novel
therapeutics.
Enhanced commercial infrastructure
As we prepare for the next phase of our growth, we have taken a
number of steps to deepen and expand our commercial capabilities.
These include the recruitment of high calibre talent, including
Terry Pizzie, our global Head of Commercial, alignment of our
product and service commercial teams to specifically address
customer needs and formation of a Strategic Alliances team focused
on adding value to key accounts. An additional emphasis has also
been placed on capitalising on the significant opportunities in
Asia-Pacific and other emerging markets. We are particularly
pleased that investments made in our eCommerce platform in 2016
continue to deliver value, with revenue increasing by 84% period on
period driven by significant growth in both number of transactions
(up 39%) and average order value (up 32%).
Over-subscribed GBP80 million Placing
On 23 August 2017 Horizon completed an over-subscribed placing
of shares, raising gross proceeds of GBP80 million. Following costs
associated with the acquisition of Dharmacon and settlement of the
drawn element of the debt facility, the Group is in a strong cash
position. The funds were raised from existing and new UK investors
and a significant number of new blue-chip international
shareholders including many specialist US healthcare investors. We
are also delighted to welcome GE onto the register as a significant
shareholder in Horizon following their receipt of shares as part of
the acquisition.
PRODUCTS UPDATE
Horizon offers a broad and expanding range of off-the-shelf
products in three tiers, which combined deliver a scalable
portfolio of predictable and visible revenue to the Group at strong
gross margins.
Research products:
-- RNAi, cDNA/ORFs, cell & in vivo models, and CRISPR
reagents that support customers engaged in academic research and
drug discovery customers and characterised by high volumes, strong
margins (target of more than 60% gross margin), cash generation and
modest growth (target of more than 10% per annum)
Applied Products:
-- Diagnostics reagents that support the development and
effective use of diagnostic assays, characterised by high volumes,
strong margins (target of more than 70% gross margin), cash
generation and strong growth (target of more than 30% per
annum)
-- Bioproduction cell lines that support considerably greater
efficiencies in biologic drug manufacture, characterised by lower
volumes, very high margins (target of more than 80% gross margin),
cash generation and very high growth (target of more than 40% per
annum)
Continued revenue growth and margin expansion
The Products business reported revenue of GBP5.3 million,
representing growth of 10% over H1 2016 (six months to 30 June
2016: GBP4.8 million). Products growth in the first half of the
year has been driven by development of the catalogue cell line
business and our bioproduction cell lines, and we continue to see
strong progress with our diagnostic products sold through our
eCommerce platform. We remain excited by the prospects for H2 with
a strong Products pipeline in place and significant revenue from
custom projects, OEM relationships, and bioproduction licenses
weighted to the second half of the year.
In addition to scale, the Products business is expected to
deliver strong margins for the Group. During the period, margins
continued to expand, reaching 73% (six months to 30 June 2016: 65%)
due to increased transactional versus custom sales volumes combined
with the benefit of cost saving efforts to drive operational
efficiencies, greater penetration of the eCommerce platform and
increasing leverage of Horizon's extensive product catalogue.
Products business highlights
Research products:
-- Multiple high value cell line subscription agreements have
supported revenue growth of more than 40% period on period in the
Cell Line Catalogue business, with a strong pipeline of additional
deals in place
-- Abcam extended a pre-existing license and supply agreement,
exercising an exclusivity provision for the use of Horizon's
knockout cell models to validate its antibody catalogue at an
unprecedented scale
-- Horizon's novel in vivo models to support autism research,
developed in partnership with Autism Speaks, highlighted in the
Atlantic as key tools promising to help facilitate the
understanding and treatment of Autism disorders
-- Commercial launch of four patient derived xenograft (PDX)
models to support research into BRAF-resistant melanomas
Applied products:
-- The Biomanufacturing business continues to grow rapidly,
achieving 45% period on period growth with a strong pipeline for
H2
-- To date, Horizon has sold 12 commercial licenses to customers
in the United States, Europe, India, and China, and more than 40
additional evaluations are underway or in advanced discussions
-- Horizon established and publicly released a high-quality
sequence map based on Horizon's GS Knock-Out CHO K1
biomanufacturing cell line, further establishing Horizon as a
leader in this market and empowering the Group's continuous
innovation process
-- Horizon Reference Standards were used as a critical component
in a recent successful premarket approval application (PMA) filing
with the FDA for a companion diagnostic in oncology by a leading
next generation sequencing company
-- High profile commercial validation of Horizon's Reference
Standards by Thermo Fisher Scientific for use in cancer research
testing
-- Launch of OncoSpan, a novel cell line-derived multiplex DNA
Reference Standard to support the validation of Next Generation
Sequencing (NGS) assays [post period]
Impact of the Dharmacon acquisition on the Products business
Dharmacon sells its research products primarily into the
academic market. Through this acquisition, Horizon now has access
to a powerful and well recognised brand combined with an eCommerce
platform that underpins approximately 90% of Dharmacon's
transactional sales to tens of thousands of academic researchers
around the globe. The acquisition of Dharmacon also provides
significant cross-selling opportunities, for example the ability to
offer Horizon's gene edited cell lines to academic customers in
support of the next stage of their research.
SERVICES UPDATE
Horizon's Services consist of custom model generation services,
utilising gene editing to develop models which subsequently become
part of Horizon's product catalogue, together with the high-end
application of these models in specialised assay and screening
services. The Group's Services bring strong revenues and gross
margins to the business.
Strong revenue growth and impact of operational efficiencies
realised in margin expansion
The Services business grew strongly in the first half of 2017
reporting revenue of GBP6.8 million, up 30% over H1 2016 (six
months to 30 June 2016: GBP5.2 million), with robust revenue growth
across all offerings.
Services gross margins showed significant expansion in H1 2017
to 57% (six months to 30 June 2016: 33%; FY 2016: 40%), as actions
taken in 2016 to consolidate the Group's capabilities were
realised.
Services business highlights
Custom model generation services
-- Increase in the number and value of long term collaborations,
now providing over 45% of Custom Cell Line Engineering revenue,
where Horizon not only delivers engineering projects but also
contributes significant knowledge that drives research
programmes
-- Increased penetration of the low and moderate complexity
segment of the market, now representing approximately 60% of
projects, as Horizon builds brand reputation for quality of
delivery
-- Significant operational efficiency improvements, leading to a
greater than 18% increase in cell line revenue per head over H1
2016
-- Progress in Horizon's gene and cell therapy platform for the
editing of pluripotent stem cells (iPSC) and primary human
lymphocytes, expected to contribute strongly to full year
revenues
Application services
-- Strong revenue growth in high throughput genetic screening,
up more than twofold over H1 2016 at a significant increase in
revenue per head
-- Strong growth in high throughput molecular screening,
supported by rapid customer uptake of our flagship offering,
OncoSignature
-- Relocation of the platform from Boston to Horizon's UK
headquarters in 2016 has significantly increased revenue per head
at a reduced cost base
-- Post period expansion of the functional genomic screening
portfolio to include first-to-market CRISPRi (interference) and
CRISPRa (activation) screening services
Impact of the Dharmacon acquisition on the Services business
The addition of Dharmacon's gene modulation products promises to
considerably expand Horizon's service capabilities in areas where
we have established competencies. This includes the ability to
deploy RNAi and CRISPR libraries through Horizon's high throughput
genetic and molecular screening platforms, providing an attractive
service offering to pharmaceutical and biotech customers.
RESEARCH BIOTECH UPDATE
Horizon's Research Biotech business deploys Horizon's extensive
IP, gene editing platform, products, services and know-how
alongside a ringfenced investment to develop the Group's
immuno-oncology, synthetic lethality and cell and gene therapy
ventures, which provide significant upside exposure to the business
based on the delivery of novel drugs and cell therapies into the
pharmaceutical pipeline. The Group's activities through this part
of the business also result in important innovation which helps to
fuel the Products and Services businesses.
Potential for up to GBP208 million R&D milestones plus
future product royalties
Horizon's Research Biotechnology programmes and alliances have
continued to progress in the period, and the Company remains
eligible to receive future R&D milestones of up to GBP208
million plus future product royalties (HY16: GBP208 million).
Progress continues in Avvinity Therapeutics immuno-oncology
joint venture
In March 2016, Horizon Discovery partnered with Centauri
Therapeutics to form Avvinity Therapeutics, a joint venture
established to explore the potential of a powerful and proprietary
platform called Alphamers to discover and develop novel
immuno-oncology therapeutics for the treatment of both solid
tumours and leukaemias.
The value of Avvinity's approach was recently validated through
the acquisition of Agalimmune Ltd. by BioLineRx Ltd. for a
multi-million dollar upfront payment with potential access to
substantial additional future payments based on development and
commercial milestones. Agalimmune deploys a similar approach to
Avvinity for its immuno-oncology therapeutic development, and the
Group is encouraged by the validation of this approach and feel
that there is a significant opportunity to bring substantial value
creation to Horizon shareholders.
Recent progress on the three programmes gives confidence in the
approach being taken and an update will be provided prior to the
end of 2017.
FINANCIAL REVIEW
Revenue growth for the six month period ended 30 June 2017 for
the Group was GBP12.1 million (HY16: GBP10.2 million), an increase
of 19% and in line with expectations given Horizon's historical
(40%:60%) H1:H2 revenue phasing. Horizon's Products business
reported revenues of GBP5.3 million during the period (HY16: GBP4.8
million), with the biomanufacturing and research product businesses
both delivering particularly good growth. Revenue for the Services
business was strong, with growth of 30% and reported revenue of
GBP6.8 million (HY16: GBP5.2 million).
Group gross margins expanded considerably period on period to
64% (HY16: 48%), driven by an increasing mix of revenues derived
from products (73% margin) relative to services (57% margin), the
impact of scale as the revenues continue to grow beyond the Group's
fixed cost base and the realisation of cost savings from steps
taken in 2016 to improve operational efficiencies throughout the
organisation.
Operating expenditure for the period was GBP15.9 million (HY16:
GBP11.2 million), in line with expectations as the business
transitions towards sustainability with targeted investments geared
to further improve scalability, operational efficiency and drive
commercial and innovation capabilities. Operating expenditure
included non-cash items of GBP2.4 million (HY16: GBP2.2 million) in
respect of amortisation of acquired intangible assets, depreciation
and share option charges.
The half year saw an improvement in Products and Services Loss
Before Interest, Tax, Depreciation and Amortisation to GBP3.6
million (HY16: (GBP3.9) million) which reflects Horizon's
historical H1:H2 phasing of revenue of c.40%:60% and fixed cost
base of the business. Our loss after tax for the period was GBP8.2
million (HY16: GBP6.0 million), in line with expectations for the
first half of the year. The Group is delivering our Path to Profit
strategy, with steps taken in 2016 to drive operational
efficiencies now underpinning significant margin improvements
across the business. We expect to report approximately break-even
EBITDA before exceptional items and discontinued operations for the
consolidated Group in FY17 as revenues continue to scale.
Additional actions are in progress to consolidate core capabilities
and align our resources towards the most value-driving activities.
These actions include the consolidation of cell line manufacturing
capabilities from our Vienna facility into Horizon's UK-based in
vitro Centre of Excellence. We anticipate a c.5% annualised
reduction in staffing costs through these actions, which are
expected to accelerate Horizon's drive towards sustainable
profitability.
The Group's cash balance as at 30 June 2017 was GBP4.8 million
(HY16: GBP13.0 million). Post period, the Group's cash position was
significantly bolstered through an over-subscribed GBP80 million
share placing which, following costs associated with the
acquisition of Dharmacon and settlement of the drawn element of the
debt facility, will be deployed to support accelerated growth,
drive sustainable revenue growth and margin expansion, exploit
synergies to drive profitability and strengthen the balance
sheet.
Current trading and outlook
Performance for the first half of 2017 was in line with
expectations, demonstrating continued revenue growth across the
Group as the business continues to scale, with a particularly
strong performance in Services following the restoration of
capacity to the molecular screening business. Given Horizon's
historical H1:H2 revenue weighting and strong H2 pipeline, the
Group expects to achieve FY2017 revenue of GBP30 million - GBP33
million on a standalone basis, GBP37 million - GBP41 million
inclusive of the impact of the acquisition of Dharmacon.
With excellent momentum in Horizon's core business, and through
the exploitation of near-term opportunities associated with the
acquisition of Dharmacon, the Board is confident in the Group's
future prospects and Horizon looks forward to a strong performance
in the second half of the year and beyond.
References:
1. DiMasi JA, Grabowski HG, Hansen RA. Innovation in the
pharmaceutical industry: new estimates of R&D costs. Journal of
Health Economics 2016;47:20-33
Independent review report to Horizon Discovery Group plc
for the six months ended 30 June 2017
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2017 which comprises the consolidated
income statement, consolidated statement of other comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated cash flow statement and
related notes 1 to 9. We have read the other information contained
in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the AIM Rules of the London Stock Exchange.
As disclosed in the notes, the annual financial statements of
the Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report have been prepared in
accordance with the accounting policies the Group intends to use in
preparing its next annual financial statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2017 is not prepared, in all material respects, in accordance
with the AIM Rules of the London Stock Exchange.
Deloitte LLP
Statutory Auditor
Cambridge, UK
26 September 2017
HORIZON DISCOVERY GROUP PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months ended 30 June 2017
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2016
2017 2016 GBP`000
GBP`000 GBP`000
Note
REVENUE 2 12,101 10,203 24,074
Cost of sales (4,373) (5,351) (10,981)
Gross profit 7,728 4,852 13,093
Other operating income 2 415 365 830
Sales, marketing and distribution
costs (3,961) (2,681) (5,251)
Research and development
costs (4,222) (2,350) (6,177)
Corporate and administrative
expenses (7,040) (6,858) (13,255)
Share of results of joint
ventures (218) (142) (333)
Exceptional items 3 (934) 460 (1,270)
OPERATING LOSS (8,232) (6,354) (12,363)
Investment income 2 - 32 51
Finance costs (257) (117) (144)
LOSS BEFORE TAX (8,489) (6,439) (12,456)
Taxation 274 416 1,023
LOSS FOR THE PERIOD (8,215) (6,023) (11,433)
LOSS PER SHARE
Basic and diluted (pence) 4 (8.6p) (6.4p) (12.1p)
HORIZON DISCOVERY GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE
INCOME
Six months ended 30 June 2017
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2016
2017 2016 GBP`000
GBP`000 GBP`000
LOSS FOR THE PERIOD (8,215) (6,023) (11,433)
Items that may be reclassified
subsequently to profit or
loss:
Exchange differences on
translation of foreign operations (1,837) 5,090 7,811
Other comprehensive income
for the period net of tax (1,837) 5,090 7,811
TOTAL COMPREHENSIVE INCOME
FOR THE PERIOD (10,052) (933) (3,622)
Total comprehensive income
attributable to:
Owners of the Company (10,052) (933) (3,622)
HORIZON DISCOVERY GROUP PLC
CONDENSED CONSOLIDATED BALANCE SHEET
30 June 2017
Unaudited Unaudited Audited
As at 30 As at 30 As at 31
June 2017 June 2016 December
GBP`000 GBP`000 2016
Note GBP`000
Non current assets
Goodwill 5 34,651 33,909 35,873
Other intangible assets 15,679 15,296 16,241
Property, plant and
equipment 11,918 11,876 12,025
Investments 2,021 2,429 2,238
Other receivables 433 - 433
64,702 63,510 66,810
Current assets
Inventories 2,017 1,934 1,955
Trade and other receivables 10,507 8,501 12,568
Cash and cash equivalents 4,756 13,028 6,071
17,280 23,463 20,594
Total assets 81,982 86,973 87,404
Current liabilities
Trade and other payables (11,389) (5,718) (8,701)
Net current assets 5,891 17,745 11,893
Non-current liabilities
Deferred tax (975) (965) (813)
Total liabilities (12,364) (6,683) (9,514)
Net assets 69,618 80,290 77,890
Equity
Share capital 6 2,596 2,580 2,583
Share premium account 62,406 61,812 61,999
Share option reserve 2,280 2,077 2,177
Merger reserve 35,709 34,453 34,452
Retained earnings (33,373) (20,632) (23,321)
Total equity 69,618 80,290 77,890
HORIZON DISCOVERY GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 June 2017
Unaudited Unaudited Unaudited Unaudited Unaudited
Share Share Share Merger Retained
capital premium option reserve earnings Total
GBP`000 account reserve GBP`000 GBP`000 GBP`000
GBP`000 GBP`000
Balance at
1 January 2017 2,583 61,999 2,177 34,452 (23,321) 77,890
Loss for the
period - - - - (8,215) (8,215)
Shares issued 4 407 - - - 411
Issue of shares
for deferred
consideration
on Haplogen
acquisition 9 - - 1,257 - 1,266
Accumulated
other comprehensive
income - - - - (1,837) (1,837)
Credit to equity
for equity
settled share
based payment
transactions - - 103 - - 103
Balance at
30 June 2017 2,596 62,406 2,280 35,709 (33,373) 69,618
Unaudited Unaudited Unaudited Unaudited Unaudited
Share Share Share Merger Retained
capital premium option reserve earnings Total
GBP`000 account reserve GBP`000 GBP`000 GBP`000
GBP`000 GBP`000
Balance at
1 January 2016 2,571 61,774 1,936 33,274 (19,699) 79,856
Loss for the
period - - - - (6,023) (6,023)
Shares issued 1 38 - - - 39
Contingent
share consideration
to be issued
on Haplogen
acquisition 8 - - 1,179 - 1,187
Accumulated
other comprehensive
income - - - - 5,090 5,090
Credit to equity
for equity
settled share
based payment
transactions - - 141 - - 141
Balance at
30 June 2016 2,580 61,812 2,077 34,453 (20,632) 80,290
HORIZON DISCOVERY GROUP PLC
CONDENSED CONSOLIDATED CASHFLOW STATEMENT
Six months ended 30 June 2017
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31
30 June 30 June December
2017 2016 2016
GBP`000 GBP`000 GBP`000
Note
Net cash outflow from operating
activities 7 (3,629) (3,644) (8,151)
Investing activities
Interest received - 32 38
Acquisition of investment
in a joint venture - (2,571) (2,571)
Purchases of property,
plant and equipment (1,360) (4,652) (5,726)
Proceeds from sale of property,
plant and equipment - 46 48
Purchase of intangible
assets (551) (1,422) (2,733)
Payment of deferred consideration - - (418)
Net cash used in investing
activities (1,911) (8,567) (11,362)
Financing activities
Proceeds on issue of shares
net of expenses 410 14 141
New bank loans raised 4,000 - -
Interest paid (162) - -
Net cash from financing
activities 4,248 14 141
Net decrease in cash and
cash equivalents (1,292) (12,197) (19,372)
Cash and cash equivalents
at beginning of period 6,071 25,067 25,067
Effect of exchange rate
changes (23) 158 376
Cash and cash equivalents
at end of period 4,756 13,028 6,071
HORIZON DISCOVERY GROUP PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
Six months ended 30 June 2017
1. ACCOUNTING POLICIES
General information
This condensed consolidated interim financial information does
not constitute statutory accounts within the meaning of section 434
of the Companies Act 2006. Statutory accounts for the year ended 31
December 2016 were approved by the Board of Directors and have been
delivered to the Registrar of Companies. The audit report on those
accounts was unqualified, did not draw attention to any matters by
way of emphasis and did not contain any statement under section
498(2) or (3) of the Companies Act 2006.
This consolidated interim financial information has been
reviewed, not audited.
Basis of preparation
The annual financial statements of Horizon Discovery Group plc
are prepared in accordance with International Financial Reporting
Standards (IFRS) and IFRS Interpretations Committee (IFRIC)
interpretations as adopted by the European Union and the Companies
Act 2006 applicable to companies reporting under IFRS. The
condensed consolidated set of financial statements included in this
half-yearly financial report has not been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the European
Union.
The accounting policies adopted in the preparation of the
condensed consolidated interim information are consistent with
those followed in the preparation of the Group's financial
statements for the year ended 31 December 2016 except where
disclosed otherwise in this note.
Risks and uncertainties
An outline of the key risks and uncertainties faced by the Group
was described on pages 34 to 36 of the Company's Annual Report and
Financial Statements for the year ended 31 December 2016 including,
competition, technology and intellectual property risks. A further
assessment was made at the half year and the significant risks
identified were unchanged from those in the annual report.
Specifically the Board does not consider the recent vote in the UK
to exit the European Union will materially impact the Group's
underlying business and as such will not necessitate any change to
the Group's identified risks. It is anticipated that the risk
profile will not significantly change for the remainder of the
year. Risk is an inherent part of doing business and the strong
cash position of the Group, along with the growth profile of the
business, leads the Directors to believe that the Group is well
placed to manage business risks successfully.
Going concern
The Group's forecasts and projections, taking account of
reasonably possible changes in trading performance and the
post-period fundraising described in note 9, support the conclusion
that there is a reasonable expectation that the Company and the
Group have adequate resources to continue in operational existence
for the foreseeable future, a period of not less than twelve months
from the date of this report. Accordingly, the going concern basis
has been adopted in preparing the half-yearly financial
information.
Adoption of new and revised standards
There are no new standards that have been issued but are not yet
effective for the financial year that are expected to have a
material impact on the Group with the exception of IFRS 16: Leases.
On adoption of IFRS 16 the Group will recognise within the balance
sheet a right of use asset and lease liability for all applicable
leases. Within the income statement, rent expense will be replaced
by depreciation and interest expense. The full impact of IFRS 16 is
currently under review, including understanding the practical
application of the principles of the standard. It is therefore not
practical to provide a reasonable estimate of the financial effect
until this review is complete.
2. REVENUE
An analysis of the Group's revenue is as follows:
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2016
2017 2016 GBP`000
GBP`000 GBP`000
Products 5,321 4,835 11,327
Services 6,780 5,233 12,747
Research Biotech - 135 -
12,101 10,203 24,074
Other operating income 415 365 830
Interest received - 32 51
12,516 10,600 24,955
3. EXCEPTIONAL ITEMS
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2016
2017 2016 GBP`000
GBP`000 GBP`000
Acquisition related costs (379) - -
Decrease(Increase) in expected
settlement of contingent
consideration - 460 (368)
Restructuring costs (555) - (902)
(934) 460 (1,270)
The exceptional items in the current period are costs relating
to the acquisition of GE Healthcare Dharmacon Inc., discussed
further in note 9, and restructuring costs relating to the
relocation of the Boston operations to the UK.
4. LOSS PER SHARE
The calculations of basic and diluted loss per share are based
upon the following data:
Unaudited Unaudited Audited
Six months Six Year ended
ended 30 months 31 December
June 2017 ended 2016
GBP`000 30 June GBP`000
2016
GBP`000
Loss
Loss for the purposes
of basic and diluted
loss per share being
net loss attributable
to owners of the Company (8,215) (6,023) (11,433)
Number of shares
Weighted average number
of ordinary shares
for the purposes of
basic and diluted loss
per share 96,108,974 94,122,253 94,543,764
Loss per share (8.6p) (6.4p) (12.1p)
Basic EPS is calculated by dividing the earnings attributable to
ordinary owners of the parent by the weighted average number of
shares outstanding during the period. Diluted EPS is calculated on
the same basis as basic EPS but with a further adjustment to the
weighted average shares in issue to reflect the effect of all
potentially dilutive share options. The number of potentially
dilutive share options is derived from the number of share options
and awards granted to employees where the exercise price is less
than the average market price of the Company's ordinary shares
during the period.
IAS 33 - Earnings per Share, requires presentation of diluted
earnings per share where a company could be called upon to issue
shares that would decrease net profit or increase net loss per
share. No adjustment has been made to the basic loss per share as
at 30 June 2017, as the exercise of share options would have the
effect of reducing the loss per ordinary share, and therefore is
not dilutive.
5. GOODWILL
Unaudited
GBP`000
Cost
At 30 June 2016 33,909
Effects of movements in foreign
exchange 1,964
At 31 December 2016 35,873
Effects of movements in foreign
exchange (1,222)
At 30 June 2017 34,651
Accumulated impairment losses
At 30 June 2016, 31 December 2016 -
and 30 June 2017
Net book value
At 30 June 2017 34,651
At 31 December 2016 35,873
At 30 June 2016 33,909
6. SHARE CAPITAL
Share capital as at 30 June 2017 amounted to GBP2,596,000.
During the period, the Group issued 466,544 ordinary shares through
the exercise of employee share options.
7. NOTES TO THE CASH FLOW STATEMENT
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2016
2017 2016 GBP`000
GBP`000 GBP`000
Loss for the period (8,215) (6,023) (11,433)
Adjustments for:
Investment revenues - (32) (51)
Finance costs 330 117 -
Depreciation of property, plant
and equipment 1,236 1,140 2,317
Amortisation of intangible assets 1,004 871 1,678
Loss on disposal of property,
plant and equipment - - 25
Tax credit (274) (416) (1,023)
Change in fair value deferred
consideration - (364) 367
Share option charge 110 141 241
Share of loss of joint venture 218 142 333
Operating cash flows before movements
in working capital (5,591) (4,424) (7,546)
(Increase)/decrease in inventories (90) 3 (162)
Decrease/(increase) in receivables 3,389 1,267 (2,916)
(Decrease)/increase in payables (1,622) (801) 2,107
Cash generated by operations (3,914) (3,955) (8,517)
Tax credit received 285 311 366
Net cash from operating activities (3,629) (3,644) (8,151)
8. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation. There has
been no material change in the type of related party transactions
described in the financial statements for the year ended 31
December 2016.
9. SUBSEQUENT EVENTS
On 31 August 2017 Horizon Discovery Group plc completed the
acquisition of GE Healthcare Dharmacon Inc. from GE Healthcare for
consideration of $85 million, comprising cash of $50 million and
equity of $35 million. The fair value exercise is ongoing at the
time of this report so a full update will be given in the annual
report and accounts.
In addition, the Company has raised GBP80 million through the
issue of 39,024,390 new ordinary shares which has satisfied the
initial cash consideration for the acquisition and the balance of
the proceeds will provide additional working capital for the
enlarged Group.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LFFELATIEFID
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