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Cowen Initiates Coverage of Horizon Discovery at Outperform

NEW YORK (GenomeWeb) – Cowen has initiated coverage on Horizon Discovery Group with an Outperform rating and a £2.90 ($3.73) price target.

In a research note, Cowen's Doug Schenkel noted that Horizon has "quickly evolved into an emerging leader in gene editing life science tools," especially in the wake of the company's July acquisition of Dharmacon from GE.

Specifically, Horizon, which trades on the London Stock Exchange, said last month that it is acquiring Dharmacon for a total consideration of $85 million. Under the terms of the acquisition Horizon will pay GE $50 million in cash and will issue $35 million in new ordinary shares to a GW subsidiary, which will own about 9 percent of Horizon. Horizon also said at the time that it would raise £76.4 million through the issue of about 39 million shares.

Schenkel wrote that Cowen believes the acquisition is "complementary and synergistic with Horizon's core business. … Similar to Horizon, Dharmacon sells life science tools that enable precise genetic modulation. However, while Horizon's products are mostly focused on gene editing, Dharmacon's products mainly cover the areas of gene silencing and overexpression."

Furthermore, Schenkel noted, "Dharmacon has successfully built an operational and commercial infrastructure, as well as a very solid e-commerce platform, that can deliver its products to thousands of customers spanning very complementary end markets and geographies."

Even prior to the acquisition, Horizon's broad portfolio of gene editing tools and engineered cell lines have enabled it to enter a number of service agreements with large customers including Illumina, AstraZeneca, Novartis, and Qiagen.

These agreements have helped Horizon amass a catalog of more than 23,000 cell lines for use in academic and biopharma research and product development, Schenkel noted. In addition, the company has entered "the emerging area of higher-end, even higher-margin specialty cell lines for bioproduction and diagnostic validation purposes," he wrote.

Cowen expects Horizon's revenue to exceed £30 million in 2017, which would represent 26 percent year-over-year growth. The investment bank also expects the company to break even operationally in 2018. "The outlook for profitability and sustained 15 percent revenue growth looks even brighter subsequent to the acquisition of Dharmacon," Schenkel wrote.

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