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Evotec AG announces first nine-month 2017 results and corporate update

- STRONG OPERATIONAL AND FINANCIAL PERFORMANCE
- EXPANSION OF LEADING EXTERNAL INNOVATION PLATFORM THROUGH ACQUISITION OF APTUIT
- IMPORTANT MILESTONE ACHIEVEMENTS AND NEW WAYS OF ACCELERATING INNOVATION

 

Hamburg, Germany, 08 November 2017:
Evotec AG (Frankfurt Stock Exchange: EVT, TecDAX, ISIN: DE0005664809) today reported financial results and corporate updates for the first nine months of 2017.

FINANCIAL PERFORMANCE REFLECTS GROWTH PATH

- Group revenues: 42% increase to EUR 170.9 m (9M 2016: EUR 120.6 m);

             EVT Execute revenues up 30% to EUR 165.1 m (9M 2016: EUR 126.6 m);
             EVT Innovate revenues up 84% to EUR 33.2 m (9M 2016: EUR 17.9 m)

- Adjusted Group EBITDA up 28% to EUR 39.3 m (9M 2016: EUR 30.6 m);

             Adjusted EBITDA for EVT Execute of EUR 41.7 m (9M 2016: EUR 41.3 m);
             Adjusted EBITDA for EVT Innovate of EUR (2.4) m (9M 2016: EUR (10.7) m)

- R&D expenses at EUR 12.5 m (9M 2016: EUR 12.8 m)

- Strong strategic liquidity position of EUR 88.8 m (after completion of Aptuit acquisition)

EVT EXECUTE - EXPANSION AND GROWTH OF HIGH-QUALITY SERVICES

- Extension of value chain and high-quality development services following Aptuit acquisition

- Cyprotex integration and performance proceeding according to plan

- Multiple new and extended integrated drug discovery alliances, e.g. with Abivax, Blackthorn Therapeutics, Dermira, STORM Therapeutics and Tesaro (after period-end)

- Significant progress within ongoing alliances (e.g. Bayer alliance in endometriosis: Start of second clinical Phase I study)

- Indication extension and initiation of pre-clinical development of existing clinical asset with Bayer in new product franchise (undisclosed)

EVT INNOVATE - VERY GOOD SCIENTIFIC PROGRESS AND IMPORTANT MILESTONES

- Important milestone achievements (Kidney disease alliance with Bayer, iPSC neurodegeneration alliance with Celgene, iPSC diabetes alliance with Sanofi)

- Strong focus on expansion of iPSC platform through new strategic collaborations with Censo Biotechnologies, Fraunhofer IME-SP and Ncardia

- Unique biobank approach through NURTuRE consortium in kidney diseases

- Evotec joins NEPLEX consortium to accelerate the discovery of a novel drug discovery device to test drug candidates in human kidneys (after period-end)

- Expansion of joint venture and strategic investment in Exscientia

- Expansion of CKD Bayer alliance

- Academic BRIDGE model gaining momentum: First North American BRIDGE established with MaRS Innovation in Canada (LAB150); two funding rounds completed in LAB282 projects (Oxford University)

CORPORATE

- Acquisition of Aptuit: $ 300 m in cash (effective 11 August 2017)

- Continued high-value strategic investments and company formations (e.g. Eternygen, Exscientia, Facio Therapies, Forge Therapeutics)

- Loan facility issued by European Investment Bank of up to EUR 75 m to support Innovate R&D strategy

- Novo Holdings A/S new strategic investor in Evotec holding >10%

GUIDANCE 2017 CONFIRMED
All elements of the financial guidance confirmed

1. FINANCIAL PERFORMANCE REFLECTS GROWTH PATH

In the first nine months of 2017, Evotec's Group revenues grew to EUR 170.9 m, an increase of 42% compared to the same period of 2016 (9M 2016: EUR 120.6 m). This increase was driven primarily by three factors: the strong performance in the base business, contributions from the acquired businesses of Cyprotex (EUR 17.9 m) and Aptuit (EUR 15.0 m), and increased milestone payments. Revenues from milestones, upfronts and licences increased significantly to EUR 21.1 m compared to the same period of the previous year (9M 2016: EUR 15.6 m) including milestones from the collaborations with Bayer in endometriosis and kidney diseases, Celgene in neurodegeneration, and Sanofi in diabetes. The gross margin slightly decreased to 35.1% (9M 2016: 38.5%) due to a different business mix, a higher contribution of the EVT Execute business and the linear amortisation of the Cyprotex intangibles resulting from the purchase price allocation.

R&D investments in strategic areas of first-in-class innovation were according to plan at EUR 12.5 m (9M 2016: EUR 12.8 m). Selling, general and administrative (SG&A) expenses increased substantially by 65% in the first nine months of 2017 to EUR 29.3 m (9M 2016: EUR 17.8 m) and were mainly impacted by expenses of Cyprotex and approx. 1.5 months of Aptuit and M&A-related expenses as well as an increased SG&A headcount (Business development and administrative functions) in response to company growth.

Adjusted Group EBITDA in the first nine months of 2017 increased by 28% to EUR 39.3 m (9M 2016: EUR 30.6 m). Evotec's operating income in the first nine months of 2017 increased to EUR 25.9 m (9M 2016: EUR 20.4 m).

Liquidity, which includes cash and cash equivalents (EUR 56.8 m) and investments (EUR 32.0 m) amounted to EUR 88.8 m at the end of September 2017 (31 December 2016: EUR 126.3 m). The liquidity position in 2017 was mainly impacted by the proceeds from the capital increase with Novo Holdings A/S and cash used in the acquisition of Aptuit.

Revenues from the EVT Execute segment were EUR 165.1 m in the first nine months of 2017 and significantly increased compared to the prior-year period (9M 2016: EUR 126.6 m). This increase is primarily attributable to a strong performance of the base business and initial contributions from acquisitions. Also included in this amount are EUR 27.4 m of intersegment revenues (9M 2016: EUR 23.9 m). The increase in revenues from the EVT Innovate segment to EUR 33.2 m, which consists entirely of third-party revenues, resulted primarily from the full impact of new partnerships with Celgene and Bayer signed in 2016 as well as milestone achievements from various collaborations. The gross margin for EVT Execute was 29.0% while EVT Innovate generated a gross margin of 46.2%. R&D expenses for the EVT Innovate segment were EUR 15.3 m in the first nine months of 2017 (9M 2016: EUR 17.9 m). In the first nine months of 2017, the adjusted EBITDA of the EVT Execute segment was strong at EUR 41.7 m and slightly improved compared to the prior-year period (9M 2016: EUR 41.3 m). The adjusted EBITDA of EVT Execute in the first nine months of 2017 was affected by one-time M&A and costs associated with the Aptuit acquisition. The EVT Innovate segment reported an adjusted EBITDA of EUR (2.4) m (9M 2016: EUR (10.7) m).

2. EVT EXECUTE & EVT INNOVATE

EVT EXECUTE - EXPANSION AND GROWTH OF HIGH-QUALITY SERVICES

The strong operational performance of the first half of 2017 successfully continued into the third quarter 2017 in the EVT Execute segment. Through the acquisition of Aptuit in August 2017, Evotec extended its value chain offering in early drug discovery to pre-clinical enabling activities ("INDiGO") and high-end CMC. The integration into the Evotec Group is proceeding according to plan. Cyprotex had a very strong start and its integration into the Evotec Group is also proceeding according to plan. Furthermore, Evotec consolidated its US footprint in the first nine months of 2017 to streamline processes and services.

In addition and amongst other highlights, Evotec entered multiple new integrated drug discovery alliances, e.g. with Abivax, Blackthorn Therapeutics, Dermira, STORM Therapeutics and Tesaro (after period-end).

Furthermore, strong progress was achieved in Evotec's existing alliances. In the first nine months of 2017, a significant pre-clinical milestone was reached in the alliance with Bayer in the field of endometriosis and a clinical milestone was achieved in this collaboration for the progression of the second programme from the alliance portfolio into Phase I clinical development. This collaboration has also been extended a further year until 2018. Additionally, an existing asset progressed into pre-clinical development in a new indication (undisclosed).

EVT INNOVATE -VERY GOOD SCIENTIFIC PROGRESS AND IMPORTANT MILESTONES

The first nine months of 2017 for EVT Innovate were characterised by important achievements in strategic alliances (milestones in the kidney alliance with Bayer, the iPSC neurodegeneration alliance with Celgene, and the iPSC diabetes alliance with Sanofi) and an acceleration of various first-in-class innovations and ventures.

Strong progress was made with the strategic iPSC-based alliance with Celgene in neurodegeneration. This was demonstrated by the achievement of a milestone ($ 5.0 m) for the successful completion of a screening campaign using Evotec's iPSC-based screening platform. Evotec continues to invest into the further development and expansion of its iPSC platform and entered into new strategic collaborations with Censo Biotechnologies (UK), Fraunhofer IME-SP (Germany) and Ncardia (Belgium/Germany) to strengthen its comprehensive iPSC network.

Evotec joined the NURTuRE (National Unified Renal Translational Research Enterprise) consortium in kidney diseases, expanding its commitment to patient-centric approaches through patient-derived biobanks. After period-end, Evotec announced that it is joining the NEPLEX ("Nephron-on-a-Chip with Cellular and Extracellular Matrix Complexity") consortium to accelerate the discovery of novel drugs to treat kidney diseases. NEPLEX is a strategic collaboration combining microfluidics technology with iPSC technology to develop a functional Nephron-on-a-Chip.

Evotec's BRIDGE model is gaining significant momentum. In September 2017, Evotec initiated its first North American BRIDGE alliance with MaRS Innovation in Toronto, Canada. The goal of this new partnership ("LAB150") is to significantly shorten the drug discovery timeline and to generate viable start-up companies or high-value licencing arrangements. In its LAB282 BRIDGE alliance with Oxford University, two rounds of funding awards were completed in 2017.

3. CORPORATE

ACQUISITION OF APTUIT

Effective 11 August 2017, Evotec acquired Aptuit, a partner research organisation for integrated outsourced drug discovery and development solutions, for $ 300 m (approx. EUR 256 m; EUR/$ fx rate of 1.17) in cash. This acquisition was financed through a mix of existing cash reserves and an additional new EUR 140 m senior debt bridge facility at highly attractive terms. The one-time transaction costs related to this acquisition amounted to approx. EUR 4 m. The acquisition strengthens Evotec's position as the leading global player in the external innovation marketplace. Furthermore, it grows Evotec's business substantially and extends the value chain offering through to IND submission and beyond to integrated drug substance and drug product manufacture.

CONTINUED HIGH-VALUE STRATEGIC INVESTMENTS AND COMPANY FORMATIONS

Alongside its EVT Innovate strategy, Evotec continues to participate in strategic investments and company formations. By doing so, Evotec demonstrates its willingness to accelerate innovation by taking equity stakes in companies. Along these lines, at the end of September 2017, Evotec became the first strategic shareholder in Exscientia Ltd, a UK-based company. Exscientia is the world leader in developing and applying Artificial Intelligence approaches specifically to design new and better therapeutic molecules in a faster and more cost-effective manner. This project is the first to benefit from the European Investment Bank ("EIB") loan facility.

LOAN FACILITY ISSUED BY EUROPEAN INVESTMENT BANK TO SUPPORT INNOVATE R&D STRATEGY

In September 2017, the EIB granted Evotec an unsecured loan facility of up to EUR 75 m to support Evotec's Innovate R&D strategy. The EIB funding specifically supports Evotec's Innovate R&D strategy through a unique, innovative and flexible financing structure including a moderate reward-sharing component for the EIB. It is intended to invest the total loan financing of EUR 75 m into EVT Innovate R&D projects over a period of four years. After draw down of respective tranches, these will mature over seven years. The long-term character of this financing reduces substantially the cost of capital for innovation.

4. GUIDANCE 2017 CONFIRMED

On 16 August 2017, Evotec updated its revenue and adjusted Group EBITDA guidance following the acquisition of Aptuit. All elements of the financial guidance are confirmed.

Guidance 2017 Actual 2016
Group revenues More than 40% growth (previously: more than 15%) EUR 164.5 m
Adjusted Group EBITDA1) Improve by more than 50% compared to 2016 (previously: significantly) EUR 36.2 m
R&D expenses Approx. EUR 20 m EUR 18.1 m
1) EBITDA is defined as earnings before interest, taxes, depreciation, and amortisation of intangibles. EBITDA excludes contingent considerations, income from bargain purchase and impairments on goodwill, other intangible and tangible assets as well as the total non-operating result.
 

Webcast/Conference Call
The Company is going to hold a conference call to discuss the results as well as to provide an update on its performance. The conference call will be held in English.

Conference call details
Date: Wednesday, 08 November 2017
Time: 02.00 pm CET (01.00 pm GMT/08.00 am EST)

From Germany: +49 69 22 22 29 043
From France: +33 170 750 705
From Italy: +39 02 3601 3806
From UK: +44 20 3009 2452
From USA: +1 855 402 7766
Access Code: 37969784#

A simultaneous slide presentation for participants dialling in via phone is available at http://www.audio-webcast.com/, password: evotec1117.

Webcast details
To join the audio webcast and to access the presentation slides you will find a link on our home page www.evotec.com shortly before the event.

A replay of the conference call will be available for 24 hours and can be accessed in Europe by dialling +49 69 22 22 33 985 (Germany) or +44 20 3426 2807 (UK) and in the USA by dialling +1 866 535 8030. The access code is 654573#. The on-demand version of the webcast will be available on our website: https://www.evotec.com/article/en/Investors/Finance/Financial-Reports-2015-2017/188/6/26.

NOTE
The 2016 and 2017 results are not fully comparable. The difference stems from the acquisitions of Cyprotex PLC ("Cyprotex"), effective 14 December 2016, and Aptuit, effective 11 August 2017. The results from Cyprotex are only included from 14 December 2016 onwards. The results from Aptuit are included from 11 August 2017 onwards. The accounting policies used to prepare the quarterly statement are the same as those used to prepare the audited consolidated financial statements for the year ended 31 December 2016.

FORWARD LOOKING STATEMENTS
Information set forth in this press release contains forward-looking statements, which involve a number of risks and uncertainties. The forward-looking statements contained herein represent the judgement of Evotec as of the date of this press release. Such forward-looking statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond our control, and which could cause actual results to differ materially from those contemplated in these forward-looking statements. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based.


Results for the first nine months 2017

Key figures of interim consolidated income statement
Evotec AG and subsidiaries

In TEUR except share data and per share data

  January to
2017
September
2016
Change
in %
July to
2017
September
2016
Change
in%
Revenues 170,852 120,627 42 67,456 45,173 49
Gross margin in % 35.1 38.5 - 34.1 45.1 -
Research and development expenses
(12,521)

(12,798)

(2)

(3,979)

(3,765)

6
Selling, general and administrative expenses
(29,299)

(17,763)

65

(13,509)

(6,006)

125
Impairment of intangible assets (1,180) (1,417) (17) (1,180) - -
Other operating income (expenses), net
8,808

5,961

48

3,255

1,369

138
Operating result 25,857 20,376 27 7,623 11,987 (36)
Adjusted EBITDA* 39,279 30,639 28 13,269 14,806 (10)
Net income 13,055 11,384 15 2,937 8,663 (66)
Weighted average shares outstanding
144,251,616

132,442,175

145,579,340

132,564,098
Net income (loss) per share (basic and diluted)
0.09

0.09

0.02

0.07
* Before contingent considerations, income from bargain purchase and excluding impairments on goodwill, other intangible and tangible assets as well as the total non-operating result
 

Segment information:

First nine months 2017

In TEUR


EVT Execute

EVT Innovate

Intersegment eliminations

Evotec Group
External revenues 137,698 33,154 - 170,852
Intersegment revenues 27,433 - (27,433) -
Gross margin in % 29.0 46.2 11.7 35.1
R&D expenses (420) (15,315) 3,214 (12,521)
SG&A expenses (24,249) (5,050) - (29,299)
Impairment of intangible assets - (1,180) - (1,180)
Other operating income (expenses), net
7,078

1,730

-

8,808
Operating result 30,341 (4,484) - 25,857
Adjusted EBITDA* 41,734 (2,455) - 39,279
* Before contingent considerations, income from bargain purchase and excluding impairments on goodwill, other intangible and tangible assets as well as the total non-operating result

First nine months 2016

In TEUR


EVT Execute

EVT Innovate

Intersegment eliminations

Evotec Group
External revenues 102,656 17,971 - 120,627
Intersegment revenues 23,911 - (23,911) -
Gross margin in % 32.9 45.6 14.7 38.5
R&D expenses (53) (16,250) 3,505 (12,798)
SG&A expenses (13,855) (3,908) - (17,763)
Impairment of intangible assets - (1,417) - (1,417)
Other operating income (expenses), net
5,324

637

-

5,961
Operating result 33,112 (12,736) - 20,376
Adjusted EBITDA* 41,300 (10,661) - 30,639
* Before contingent considerations, income from bargain purchase and excluding impairments on goodwill, other intangible and tangible assets as well as the total non-operating result
 

Key figures of interim consolidated statement of financial position
Evotec AG and subsidiaries

In TEUR

  30 September
2017
31 Dec
2016
Change
in%
Cash, cash equivalents and investments 88,805 126,270 (30)
Working capital (6,714) (8,822) 24
Current and non-current loan liabilities 169,706 28,607 -
Total stockholders' equity 318,283 213,936 49
Total assets 644,006 351,366 83