- EXCELLENT 2016 FINANCIAL RESULTS DELIVERED
- CONTINUED STRONG PERFORMANCE EXPECTED
- NEW WAYS TO ACCELERATE INNOVATION IMPLEMENTED
Hamburg, Germany, 28 March 2017: Evotec AG (Frankfurt Stock Exchange: EVT, TecDAX, ISIN: DE0005664809) today announced its financial results and corporate updates for the fiscal year ended 31 December 2016.
FINANCIAL PERFORMANCE - ALL FINANCIAL TARGETS ACHIEVED
- Total Group revenues up 29% to EUR 164.5 m (2015: EUR 127.7 m); base revenues up 26% to EUR 145.6 m
- Strong revenue growth in both operating segments:
EVT Execute revenues up 28% to EUR 171.0 m (2015: EUR 134.0 m);
EVT Innovate revenues up 24% to EUR 26.7 m (2015: EUR 21.5 m)
- Adjusted Group EBITDA increased to EUR 36.2 m (2015: EUR 8.7 m)
- Stable Group R&D expenses of EUR 18.1 m (2015: EUR 18.3 m)
- High and solid liquidity position of EUR 126.3 m (2015: EUR 133.9 m) by the end of 2016; Liquidity position further improved in Q1 2017 following EUR 90.3 m capital increase with Novo A/S
EVT EXECUTE - GLOBAL LEADERSHIP IN DRUG DISCOVERY
- Important milestone achievements (e.g. Bayer, Boehringer Ingelheim, Padlock)
- New and extended long-term deals with large and mid-sized Pharma, foundations and biotech (e.g. ANTRUK, C4X Discovery, Forge Therapeutics, Genentech, Merck, Pierre Fabre, UCB)
- New licences enhancing existing drug discovery platform (e.g. CRISPR/Cas9, Trianni)
- Full acquisition of ADME-Tox and DMPK specialist company Cyprotex PLC opens strategic global leadership position in this field; Total cash flow of EUR 66.3 m for acquisition of all shares and funding of company debt
- Restructuring of compound management operations in San Francisco due to termination of NIH contract
EVT INNOVATE - SUCCESSFUL YEAR FOR EVT INNOVATE
- Partnering and initiation of Cure X/Target X initiatives (e.g. Target?SN, TargetNASH, TargetBiSM)
- New long-term, multi-target alliance with Bayer in kidney diseases based on CureNephron
- Broad strategic drug discovery collaboration in neurodegeneration with Celgene based on Evotec's unique iPSC platform
- Phase I clinical start for the treatment of endometriosis with Bayer
- Equity participation in selected company formations (e.g. Topas Therapeutics, Carrick Therapeutics, Eternygen)
- Expansion of network of top-class academic alliances and BRIDGE from Academia to Pharma (e.g. Inserm, LAB282 with Oxford University)
- Good progress within partnered product pipeline (Endometriosis; EVT201, EVT401); Termination of EVT100 in treatment-resistant depression in 2016 and phase out of TargetAD by Janssen Pharmaceuticals (after period-end)
NOVO A/S BECOMES NEW STRATEGIC, LONG-TERM INVESTOR IN EVOTEC (AFTER PERIOD-END)
GUIDANCE 2017 - CONTINUED STRONG PERFORMANCE EXPECTED
- Group revenues expected to increase by more than 15% in 2017 (2016: EUR 164.5 m); Revenue guidance from 2017 onwards based on total Group revenues and not on revenues excluding milestones, upfronts and licences
- Research and development (R&D) expenses in 2017 are expected to be approx. EUR 20 m in total and thus similar to 2016 (2016: EUR 18.1 m)
- Adjusted Group EBIDTA expected to improve significantly in 2017 compared to 2016 (2016: EUR 36.2 m)
1. FINANCIAL PERFORMANCE
All financial targets achieved
In 2016, Evotec's Group revenues grew to EUR 164.5 m, an increase of 29% compared to the same period of the previous year (2015: EUR 127.7 m). This increase resulted primarily from growth in the core EVT Execute business, the full-year contribution of the Sanofi collaboration as well as significant milestone payments. Excluding milestones, upfronts and licences, Evotec's base revenues for 2016 were EUR 145.6 m and increased by 26% over the same period of the previous year (2015: EUR 115.4 m). Revenues from milestones, upfronts and licences amounted to EUR 18.9 m, an increase of 54% in comparison with the previous year (EUR 12.3 m) which resulted mainly from higher milestone achievements, in particular within the Company's alliances with Bayer. The gross margin in 2016 increased to 35.6% (2015: 27.5%). The margin increase over 2016 is attributable to the same drivers as in revenue growth as well as better capacity utilisation and favourable foreign exchange rate effects.
In 2016, overall Group R&D expenses amounted to EUR 18.1 m and remained on a similar level compared to 2015 (2015: EUR 18.3 m). Total Group's selling, general & administrative ("SG&A") expenses increased by 7% to EUR 27.0 m (2015: EUR 25.2 m). This increase results primarily from the full-year consideration of the Sanofi collaboration, an increased headcount in response to company growth as well as one-time M&A costs mainly related to the acquisition of Cyprotex. Adjusted Group EBITDA for 2016 increased significantly to EUR 36.2 m (2015: EUR 8.7 m) mainly due to the strong growth in revenues and milestone payments. Evotec's operating result amounted to EUR 31.3 m in 2016 (2015: operating result of EUR 11.6 m).
Liquidity, which consists of cash and cash equivalents (EUR 84.0 m) and investments (EUR 42.3 m) amounted to EUR 126.3 m as of 31 December 2016 (31 December 2015: EUR 133.9 m). Operating cash flow was positive, the slight cash decrease is mainly due to the Cyprotex acquisition, including cash acquired and subsequent redemption of loan notes holders, of £ 55.7 m (EUR 66.3 m; at an assumed £/EUR exchange rate of 1.19).
Revenues from the EVT Execute segment amounted to EUR 171.0 m in 2016, an increase of 28% compared to the prior-year period (2015: EUR 134.0 m). Included in this amount are EUR 33.2 m of intersegment revenues (2015: EUR 27.7 m). This increase mainly resulted from growth in the base business, milestone achievements and the full-year Sanofi collaboration contribution. The EVT Innovate segment generated revenues of EUR 26.7 m (2015: EUR 21.5 m) consisting entirely of third-party revenues. The increase in revenues resulted from EVT Innovate projects partnered in the second half of 2015 and continued into 2016.
Gross margin for EVT Execute amounted to 29.9% while EVT Innovate generated a gross margin of 45.3%. R&D expenses for the EVT Innovate segment at EUR 22.7 m in 2016 remained largely unchanged (2015: EUR 22.4 m). The adjusted EBITDA of the EVT Execute segment was strongly positive at EUR 50.2 m in 2016 and more than doubled compared to EUR 23.8 m in the prior-year period. The EVT Innovate segment reported an improved adjusted EBITDA of EUR (14.0) m (2015: EUR (15.1) m).
2. EVT EXECUTE & EVT INNOVATE
The Company operates and manages its business activities under its two business segments EVT Execute and EVT Innovate. These segments effectively comprise various project types operating from a common drug discovery platform. Both of them play an important role in successfully delivering on the Company's strategy.
EVT Execute provides stand-alone drug discovery services on a typical fee-for-service basis or integrated drug discovery collaborations on partners' targets through a variety of commercial structures including research fees, milestones and/or royalties.
EVT Innovate develops drug discovery programmes and assets, both internally or through academic collaborations. Evotec seeks to partner these into collaborations in return for upfront payments, ongoing research payments and significant financial upside potential through milestones and royalties.
EVT Execute - Global leadership in drug discovery
In 2016, EVT Execute demonstrated a strong operational performance shown also by important milestones achievements in its collaborations with Bayer, Boehringer Ingelheim and Padlock. Additionally, Evotec was able to enter into new drug discovery alliances, e.g. with Pierre Fabre in compound management, which will be managed at the Toulouse site; with C4X Discovery, Forge Therapeutics, UCB and Antibiotic Research UK ("ANTRUK"), the latter underlining the recent trend of an increasing number of non-governmental organisations and foundations accessing Evotec's drug discovery platforms. Various collaborations were extended in 2016, such as the drug discovery alliance with Genentech.
Consistent with the Company's strategy to offer its clients the most advanced technological platforms, Evotec continued to expand its drug discovery platforms, e.g. with a non-exclusive licence from the Broad Institute to the leading technology on the market for gene editing (CRISPR-Cas9 licence) and Trianni's next-generation transgenic technology. Along these lines, Evotec announced the acquisition of Cyprotex PLC at the end of 2016, which adds world-leading high-quality ADME-Tox services and strengthens Evotec's leadership in drug discovery. The integration of Cyprotex into the Evotec Group is proceeding according to plan and new large strategic contracts are under discussion. At the beginning of the year 2017, Cyprotex moved to Alderley Park which allows for the expansion and consolidation of Cyprotex' UK operations into a first-class scientific facility.
In the fourth quarter of 2016, the National Institutes of Health ("NIH") terminated the compound management contract with Evotec (US). Evotec has been managing NIH's compound management activities from its South San Francisco operations for many years. As a consequence, Evotec will close the compound management facility in San Francisco in the first half of 2017 and transfer all other contracted work to its Branford facility. A goodwill impairment of EUR 4.0 m was recorded in 2016 as a result of this closure.
EVT Innovate - Successful year for EVT Innovate
The EVT Innovate portfolio continued to make very good scientific and commercial progress in 2016, resulting in a very strong performance of the segment. EVT Innovate again demonstrated its ability to partner promising early-stage drug discovery approaches with Pharma companies with the start of a five-year, multi-target alliance with Bayer in the field of kidney diseases based on assets from its CureNephron portfolio. In addition, EVT Innovate accelerated its Cure X/Target X initiatives, e.g. with the TargetNASH programme together with Ellersbrook GmbH & Co. KG and an innovation partnership with ex scientia (UK) (TargetBiSM) to develop bispecific small molecule immuno-oncology therapeutics. In the first quarter of 2016, Evotec was awarded a research grant from The Michael J. Fox Foundation to further develop Evotec's Target?SN (Alpha-synuclein) programme for the treatment of Parkinson's disease. Furthermore, Evotec was able to announce the progression of a first programme from its strategic alliance with Bayer in the field of endometriosis into Phase I clinical development.
Over the last few years, Evotec directed significant resources towards creating its unique induced pluripotent stem cell ("iPSC") platform aimed at industrialising iPSC-based drug screening. Evotec has created an industrialised iPSC platform in terms of throughput, reproducibility and robustness to reach the highest industrial standards. On that basis, in December 2016, Evotec entered into a strategic drug discovery and development collaboration to identify disease-modifying therapeutics for a broad range of neurodegenerative diseases with Celgene. Evotec received an upfront payment of $ 45 m and is eligible to receive up to $ 250 m in milestones as well as up to low double-digit royalties per in-licensed programme. The use of patient-derived disease models for drug screening represents a paradigm shift as it places the testing of human disease relevance at the front end of the drug discovery process.
In March 2016, Evotec announced the formation of a spin-off company called Topas Therapeutics GmbH focused on the field of nanoparticle-based therapeutics to treat autoimmune diseases. The establishment of Topas Therapeutics is the first example of the acceleration of Evotec's business model to take advantage of carving out or investing in promising programmes with additional upside potential. Alongside this EVT Innovate strategy, Evotec invested in companies, e.g. Carrick Therapeutics Ltd. and Eternygen GmbH, to accelerate drug discovery and product development.
Furthermore, EVT Innovate is also pursuing new approaches in scouting new innovations and accelerating them along the drug discovery value chain. In November 2016, Evotec launched the highly innovative strategic partnership "LAB282" with the University of Oxford aimed at accelerating the translation of breakthrough biomedical research from Oxford into new clinical therapeutics. Within three months after initiation of LAB282, the first two projects were selected out of a pool of high-quality project proposals across various therapeutic areas and encompassing different therapeutic modalities. These efforts, referred to as "BRIDGE", are focused on highly capital efficient translation of academic science into potentially transformative pharmaceutical projects. In addition, the Company entered into its first research collaboration in the field of oncology under its French Academic Bridge with Inserm. Inserm is the private subsidiary of the French National Institute of Health and Medical Research and constitutes the only French public research institution solely focused on human health and medical research.
In the first quarter 2016, Janssen Pharmaceuticals, Inc. informed Evotec of its intention to end the licence agreement regarding the NMDA antagonist EVT100 with effect from August 2016. As a consequence, Evotec regained the licence rights. The termination of the EVT100 contract with Janssen resulted in a full impairment of the EVT100 series in Q1 2016 (EUR 1.4 m). After period-end, Evotec was informed by Janssen Pharmaceuticals, Inc. of its intention to phase out the TargetAD partnership. Evotec's clinical development programmes (EVT201 and EVT401) with the Chinese partners JingXin and CONBA are progressing according to plan.
3. NOVO A/S BECOMES NEW STRATEGIC, LONG-TERM INVESTOR IN EVOTEC (AFTER PERIOD-END)
On 09 February 2017, Evotec announced that through a private placement capital increase, Novo A/S invested EUR 90.3 m to subscribe shares of Evotec at a price of EUR 6.87 per share. The placement was at a zero discount to the XETRA closing auction price and results in an ownership of approx. 8.9%. This investment will allow Evotec to accelerate its strategy to expand and invest in best-in-class platforms and outsourcing services and to build and invest in promising Cure X and Target X initiatives together with top academic partners and biotech globally. Since this initial investment, Novo A/S has augmented its shareholdings in Evotec above 10%.
4. GUIDANCE 2017: CONTINUED STRONG PERFORMANCE EXPECTED
Revenue guidance from 2017 onwards will be based on total Group revenues and not on revenues excluding milestones, upfronts and licences. The achievement of individual milestones are single events, which bear a certain level of uncertainty and risk which is not under Evotec's full control. However, due to an increasing number of milestone-bearing projects and factoring in a probability of success, total milestone-based revenues become more predictable and contribute more and more to the Company's total revenue and profitability.