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Horizon Discovery eyes break even as Dharmacon acquisition beds down

The original Horizon business saw revenues grow by 20% to £12.1mln in the first half of 2017
picture of DNA
Horizon reproduces cell mutations to help disease study

Horizon Discovery PLC (LON:HZD) expects to be running at break even by the end of this year following the recent acquisition of Dharmacon for £85mln.

Dharmacon, which was part of US giant GE, will be included in the numbers from this month and will boost 2017 revenue to between £37-41mln.

The original Horizon business saw revenues grow by 20% to £12.1mln in the first half of 2017 and is on track for full year sales of between £30-33mln, while gross margins (or profits before costs) have jumped to 60% from 48% due to a cost-cutting drive.

WATCH: Acquisition gives Horizon Discovery a 'full and complete suite of tools' to power growth

As part of the savings programme, Horizon is to close its Vienna site and concentrate its cell line manufacturing operation in the UK.

There will be an interim underlying loss [EBiTDA]  reflecting the traditional seasonal revenue split of phasing of 40%:60% and the fixed cost base of the business. 

Horizon specialises in gene editing technology that can engineer cells and reproduce them to replicate the mutations and anomalies found in diseases such as cancer, allowing drug developers to study how they develop.

Dharmacon, also a gene specialist, has a sizeable presence in the academic market, where previously Horizon had little representation.

Darrin Disley, chief executive, said: “With the acquisition of Dharmacon now complete, and a strong balance sheet following the £80 million placing, we are well positioned to unlock the potential of this highly complementary acquisition, building an innovation-driven and customer-focused business that delivers sustained growth and profitability."

In late afternoon trading, Horizon Discovery shares were 0.4%, or 1.0p higher at 239.0p.

Analysts at Numis Securites repeated a ‘buy’ rating on Horizon Discovery shares and raised their target price for the stock to 300p.

In a note to clients, they said: “The shares now trade on 4.8x EV/FY18 revenues for >14% revenue CAGR through to 2020. We factor in the dilution and upgrade our target price to 300p/share (6.4x EV/FY18 sales) based on a blended divisional SOTP analysis between the Products and Services business”.

 -- Adds share price, analyst comment --

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