Horizon Discovery, the Cambridge UK medical technology innovator, is raising a minimum £25 million on a London float that will trigger global acquisitions, territorial expansion and an acceleration of products and services to target more patients with individual medicines based on their genetic makeup.The hot money in the City is that Horizon’s AIM IPO will be massively oversubscribed. So while the £25m will be new money, existing investors could substantially boost that haul.
The new cash will pile on top of the millions already in Horizon’s war chest to bolster the company’s acquisition and expansion armoury. The US is likely to be the main focus for tight-fitting acquisitions to boost Horizon’s product pipeline in translational genomics.
CEO of the business Dr Darrin Disley said the company intends to expand massively across the United States as well as into new territories such as China; it also intends to scale up in India where it recently opened operations, Japan where it is becoming established, and also set up a footprint in many other locations.
Sentiment for the Horizon float is as overwhelming as for any IPO witnessed for a Cambridge business in any sector – let alone in the oft-misunderstood life sciences arena. Then Horizon is not your average life science company. It has turned the biotech paradigm on its head by being commercial from Day One – insisting that sales drive growth and that early adopters drive those sales.
Dr Disley intends to make Horizon the greatest life science company created in Cambridge and one that delivers life-saving treatments for patients as well as returns for stockholders.
A £25m IPO target might seem modest for a company whose technology is geared towards a market segment expected to generate some £30 billion of revenues by 2015. But Dr Disley said: “The new money tops up the £20m we have already raised to date, of which a quarter is remaining, as well as a similar amount in revenues generated by sales. We can leverage R & D potential future milestone payments totalling around £120m – plus royalties on tiered product sales. And we are looking to grow our product and services pipelines to build on our rich revenue streams.”
Blending the power of its technology with increased revenue streams will help Horizon boost its leverage into the pharmaceutical and diagnostic value chain.
The foundations for the float and continued global expansion have been laid in a stunning last year of trading which saw Horizon invoice £7.1m of revenues, contracted milestones of £104m and 72 per cent revenue growth on 2012.
Horizon has more than 800 customers in 45 countries and 92 per cent of business last year came from exports. Yet Horizon almost vanished from the Cambridge business landscape and went to Italy or another European base. At a key phase of its development, Cambridge friends for the business were thin on the ground. So the company set up labs in Turin - and subsequently at Babraham Research Campus – but was still constrained.
The company was about to withdraw when an opportunity for space and subsequent growth developed at Cambridge Research Park and the founders decided to give it one last go.
Horizon has continued to expand at CRP and we can exclusively reveal that space has been earmarked at the research park for a headquarters around twice the size of the current operations with a start on site in two years’ time.
Dr Disley explained why Horizon was so substantially different to the typical Cambridge life science business. “Most of the technology we brought in was generated outside of the UK - Horizon’s science was coralled almost entirely from international sources, from the US, Italy and elsewhere.
“Also we were commercial from the off. Biotech was almost cursed by the view that every new drug would be at least 15 years in the clinic. The science ruled while sales took a back seat - but not with us. Our focus was always on creating revenue and doing deals. Every small deal counted. We knew that customers who took our technology would go out and spread the word about how good we were. That led to endorsements and further sales.
“We had crucial backing in the early days from Genentech and Jonathan Milner who has built Abcam into a global market leader. But it was all part of the same winning formula.”
Scaling up from Cambridge remains the magnificent obsession for Dr Disley and his board. He believes Cambridge provides the perfect platform for global scale-up.
“Fourteen per cent of all life science papers published in recent years have emanated from the UK. Life science research from universities locally is prolific and often world-leading. We have internationally renowned entrepreneurs driving growth of medical technologies.
“I have always wanted Horizon to be a global company. I want us to be the greatest biotech in the UK. Generally our life science businesses are not ambitious enough. When we started we would sell one vial and handle one project at a time and then build on that to gain momentum.
“We have always been extremely capital efficient. We haven’t spent the £10m we have raised to date: So we have a lot of money to put to work. We have built a good product pipeline and now want to develop more market muscle.
“So we will grow our product and services pipeline to generate even more revenues. And we will expand our geographical footprint. We are in Bangalore on a modest scale but will be ramping up there. We are Coast to Coast in the US and also in Canada. And other territories are on the radar.
“M & A is an obvious way for us to grow headcount and our product pipeline as long as potential acquisitions are a good strategic fit and we see the North American market as a prime opportunity in this regard. We need more boots on the ground in the US and that is one of the prime goals following the IPO.
“Momentum is with us: half of our 800 customers came in the last year in 45 different countries – and that’s before we start democratising the technology.”
Horizon is riding a tiger, as the growth stats demonstrate. It was a virtual company in most respects in 2007-08 with small labs in Italy and Babraham. Ensconced at Mountgrange’s Cambridge Research Park, the company went from eight staff to 40 between 2008 and 2010. Numbers rose to 75 in 2012 and 87 currently. By the time the new Cambridge HQ is opened in a couple of years, headcount will be around 110 and the figure will rise exponentially to the 200 mark in the UK alone.
The management has been considerably strengthened in recent times with a savvy chairman, industry-hardened non-execs and a new financial chief in Richard Vellacott who helped transform wireless company CSR and is now helping Horizon mature fast on the global stage.
Dr Disley said: “Richard has arguably been our best acquisition to date. Most finance chiefs I know who have two screens on the go in their office, have the second one dedicated to their stock portfolios – not Richard. He focuses on life sciences. He has a degree in life sciences. He is incredibly strategic and strictly NOT a bean counter. His expertise has enabled us to get a 100 per cent handle on every aspect of our business model and strategy.”
And so to the goal of helping to deliver personalised medicines. Dr Disley said: “Sequencing has advanced the game. You can get your genome sequenced for under $1,000 and that will drill down to around $200 over time. So if you emerge from your GP‘s surgery with a bad diagnosis – say cancer – the chances increasingly are that you will be offered medicines that fit your genomic profile.
“Big Pharma has had to scrap the one drug fits all model and are now working to match drug candidates against clearly defined populations based on individuals’ specific genetic make-up. No more 15 years in the clinic and up to $10bn dollars on R & D in the hope of engineering a successful drug.
“And that is where Horizon comes in: Our technology helps pharma find the niche buster drugs against clearly defined populations and genetic profiles. The toolbox of drugs and technologies is increasing all the time and our world-leading research tools are contributing greatly to this increasing resource.”
As a former goalkeeper who had trials with West Ham, Fulham and Southend, and who played semi-pro for many years, Dr Disley is clearly a safe pair of hands as Horizon aims for greater goals.
While one shrinks from talk of rags to riches stories, it is true to say that Dr Disley came from a poor background, left school with no A levels and was thrown a lifeline by Professor Chris Lowe at Cambridge University’s Institute of Biotechnology.
“I went to the US coaching soccer for a while before taking my PhD but fell lucky when Chris needed to fill a key vacancy with the clock ticking on grant funding. I blagged my way through interview - and he knew it.
“But he needed a warm body or risk losing the grant and it came down to whether I could breathe and had a pulse. He was fantastically supportive and that set me on the road to starting a new kind of biotech – one that broke the mould, was commercially focused and thrived on ambition for continued global growth.”
• PHOTOGRAPH SHOWS: Horizon CEO, Dr Darrin Disley