Gene editing specialist Horizon Discovery Group PLC (LON:HZD) has inked a co-development and commercialisation agreement with Ventana Medical Systems, an arm of the drug major Roche.
The tie-up covers the development, manufacture and commercialisation of cell line derivative materials for use as immunohistochemistry (IHC) reference standards in cancer tissue diagnostics.
Ventana is expected to commission Horizon to develop cell lines to use, while the AIM-listed healthcare specialist will be responsible for commercialising the new reference standards.
"By securing this agreement, Horizon's reference standards will now be used increasingly in the IHC market, continuing the company's successful strategy of embedding OTS products into established and emerging workflows, delivering reliable revenue streams at high margin," said Horizon chief executive Darrin Disley.
Mike Mitchell, equity analyst at Panmure Gordon, says that without any financial details, analysts are unlikely to move their forecasts on the back of this announcement, but it does help to reinforce the investment thesis and he says investors should view the announcement favourably.
“[Today’s news] continues to build on what investors have been hearing from the company over the past six months or so," he explains.
"It doesn’t significantly suddenly change anything but it...further underpins the investment case."
How reference standards work
At first glance, the science behind how reference standards work can seem quite complex.
Essentially, the reference standards that Horizon is able to produce act as a benchmark to real patient tissue samples.
By using these benchmarks, pathologists can better determine exactly what they’re looking at when they put the tissue samples under the microscope.
Chris Claxton, VP of investor relations and corporate communications at Horizon, breaks it down further, explaining: “It’s like trying to figure out the different shades of blue.”
“If two colours are side by side, you can easily say, ‘well this one’s lighter and this one’s darker’, but if you’re looking at it by itself, it’s much more difficult to tell.”
Validation
While a deal of this kind with anybody would undoubtedly be another positive step for the firm, Claxton says the exposure and validation of working with some of the most high-profile names in the industry is a huge bonus.
“When you’ve got an organisation like Ventana stepping behind a company like Horizon, it certainly is a powerful endorsement of us,” he says.
“It’s high validation from a really big name, probably the biggest name in tissue diagnostics.”
Panmure's Mitchell also says that by putting Roche's name to the deal, it adds "credence" to Horizon's strategic vision in the immunohistochemistry area.
What is immunohistochemistry?
Immunohistochemistry is used to help diagnose diseases such as cancer and it can also be used to determine which type of cancer someone has, as well as what treatment might work best.
“If you’re a woman unfortunate enough to have breast cancer, you need to understand whether you’re one of the potential responders to a drug called Herceptin,” Mitchell explains.
“A pathologist will then conduct a test to see whether or not you are able to use a variety of different drugs for your particular type of cancer.”
Shares were up nearly 8%, or 13.5p, to 173p.
--Updates for analyst comments, background information and share price --