- Sales increase of 50% to EUR 16.9 million
- 42% growth in drug discovery services
- Net loss reduced by 86% to EUR (5.7) million
- EBITDA of EUR (0.7) million close to break-even
- Cash burn significantly reduced to EUR 1.8 million in Q1
- Several multi-year collaborations extended and expanded
- Strong order book covering approximately 60% of 2002 analysts' revenue consensus
Hamburg, Germany | Abingdon, UK " We are pleased to report on the Q1 2002 progress of Evotec OAI. Our comprehensive drug discovery service, encompassing all the major biology, screening and chemistry activities to develop candidate drugs, continued to perform well.
Evotec OAI revenues amounted to EUR 16.9 million, an increase of 50% over Q1 of the previous year (2001: EUR 11.3 million) and significantly above the expected average year-on-year growth rate. EUR 2.3 million of revenues were deferred from Q4 2001 into Q1 2002 as a result of our strictly adopting the relevant revenue recognition policy (SAB 101) under US GAAP and US GAAS. Even after adjusting for this deferral, Q1 revenue growth reached an impressive 30%, the upper end of our internal organic growth expectations.
The Drug Discovery Services Division revenues grew by an impressive 42% to EUR 14.9 million (2001: EUR 10.5 million). This is primarily attributable to growth in discovery activities, both biology and chemistry, where the achievement of milestones in our collaborations with MediGene and Byk Gulden contributed. In addition, revenues from pilot plant orders which were completed but not delivered in 2001, were booked in Q1 sales.
The Drug Discovery Tools and Technology Division Q1 revenues grew by 160% to EUR 2.0 million (2001: EUR 0.8 million). This strong growth over the comparable period of 2001 is attributed to the recognition of the remaining revenues for the EVOscreen® Mark III system successfully installed at GlaxoSmithKline in this quarter and to strong progress in our instrument business from sources other than consortium partner contracts (i.e. Evotec Technologies, ET). ET's benchtop and applications business grew to EUR 0.9 million (2001: EUR 0.3 million).
During Q1 2002 we maintained our strong presence in the United States where the company generated 49% of its revenues. Europe contributed 49% and Japan 2% to total sales.
In summary, we overachieved our revenue goals for Q1 and are on track for the full year 2002. As in the previous years we expect Q4 to be the strongest quarter for revenue recognition in our fiscal year.
Orders with new customers signed and several agreements extended/expanded. A number of new deals have been signed as well as extensions and expansions of existing ones. This reflects the continuing quality of our integrated services and its value to our collaborators. New discovery contracts have been signed with Ionix, Point, SiREEN, whilst we have extended contracts with Vertex, Amgen, Roche and Serono. Two important milestones in our collaborations with MediGene and Byk Gulden have also been met in March. As usual, we were able to charge fees for our high-quality services, and secure upsides through milestones and royalty provisions.
In our development laboratories and pilot plant we continue to develop scaleable routes and produce active pharmaceutical ingredients to support our clients' clinical trials. In Q1 we have produced material for customers such as Achillion, Celgene, Elan, VitaResc and Alizyme.
In technology development we are particularly proud that our long-term partner Novartis has decided to acquire additional Evotec OAI screening devices (EVOscreen®) exceeding the scope agreed in the original screening technology contract signed in 1996. This is a further blue chip validation of our leading screening platform EVOscreen® Mark III after the acceptance of the first clone by GSK at the end of last year.
R&D. Our R&D activities continue to be increasingly focused on drug discovery applications, namely the development of new biological assay systems and to a limited extent proprietary drug discovery research. Overall R&D costs amounted to EUR 5.5 million, 12 % less than in the comparable period of 2001 (EUR 6.2 million) when the completion of the EVOscreen® Mark III platform was hitting a high.
Operating result improved as reported (+83%) and before merger-related amortisation (+33%). The Evotec OAI group operating loss for Q1 2002 decreased significantly by 83% to EUR (7.0) million (2001: EUR (40.5) million). This is mainly a consequence of changes in US GAAP regulations regarding goodwill amortisation from acquisitions. Amortisation is therefore significantly lower and limited to non-goodwill intangible items. Also excluding merger-related amortisation of intangible assets (non-cash effect) the Evotec OAI group loss from operations for the first three months improved by 33% to EUR (4.1) million (2001: EUR (6.1) million).
Net loss reduced by 86%. Net loss in the first three months amounted to EUR (5.7) million, an 86% improvement over Q1 2001 (2001: EUR (40.1) million). Net loss includes tax benefits totalling EUR 0.5 million.
Net income per share amounted to EUR (0.16) (Q1 2001: EUR (1.13).
Almost EBITDA break-even. Cash earnings (EBITDA = Earnings before interest, tax, depreciation and amortisation) improved significantly by 83% to EUR (0.7) million (2001: EUR (3.9) million). EBITDA per share improved to EUR (0.02) from EUR (0.11) in 2001.
Solid cash position. In Q1 2002 cash flow from operating activities was EUR (0.7) million compared to EUR 3.3 million in the same period of 2001. Positive cash flow from operating activities in Q1 2001 was primarily the result of a reduction of working capital, showing a decrease of trade accounts receivable (resulting in high payments in the first quarter) and an increase in the trade accounts payable.
Cash and marketable securities as of March 31, 2002 amounted to EUR 26.1 million, only EUR 1.8 million less than year end 2001. As expected, our cash burn improved significantly over the same period in 2001.
Optimistic outlook for 2002. Evotec OAI continued strong growth in Q1 2002 as planned. Our order book is strong: as of May 1, 2002, it already accounts for approximately 60% of analysts' revenue expectations for the current fiscal year (consensus: EUR 85 million). Our performance is a clear validation of our business strategy. On the basis of a promising business development pipeline we remain confident to achieve analysts' revenue targets for 2002.
As expected, we significantly improved our financial performance almost achieving EBITDA break-even in the first quarter.
Our priority going forward is to develop, complete and aggressively market our integrated drug discovery services, drive forward their short-term financial performance and maximise their mid- to long-term upsides from milestones and royalties. This stable and validated core element of our business gives us the fundamental financial strength to continuously work towards long term value maximisation.