Hamburg, Germany - Evotec AG (Frankfurt Stock Exchange: EVT; NASDAQ: EVTC) today reported results for the first half of 2008.
 
Evotec revenues for the first half of 2008 were EUR 14.5 million, 8% below last year's level (2007: EUR 15.8 million), mainly the result of the further weakening of the US dollar against Evotec's reporting currency, the Euro. At constant 2007 currencies (UK Sterling and US dollar), revenues in the first half of 2008 would have been EUR 16.1 million, slightly increased over the previous year.
 
The operating loss for the first half of 2008 amounted to EUR 26.9 million (2007: EUR 23.6 million). The increase is a result of high investments in research and development. R&D expenditure increased by 33% to EUR 21.9 million (2007: EUR 16.4 million) primarily due to the Q1 2008 milestone expense related to our collaboration with Roche based on the initiation of Phase II trials with EVT 302 and the inclusion of Renovis R&D costs following the acquisition in May.
 
Liquidity which includes cash and cash equivalents (EUR 42.4 million), short-term investments (EUR 50.3 million) and auction rate securities (EUR 8.3 million) at the end of June 2008 amounted to EUR 101.0 million (December 31, 2007: EUR 93.7 m). Based on year-end 2007 currency exchange rates, liquidity would amount to EUR 105.6 million. Evotec including Renovis experienced an approximately EUR 4.6 million unrealized loss in the translation of liquid assets held in US dollars or UK Sterling into Euros.
  
Acquisition of Renovis successfully completed
On May 1, 2008 the Renovis stockholders voted in favor of the acquisition by Evotec which was subsequently completed on May 2, 2008. In exchange for each outstanding share of Renovis common stock, Renovis stockholders received 0.5271 American Depositary Shares, or ADSs, of Evotec, which have been listed on the NASDAQ Global Market under the trading symbol "EVTC". As a result, Evotec has issued an aggregate of 34,970,268 new ordinary shares, which underlie the ADSs issued to Renovis stockholders. To ensure that new Evotec shareholders will be able to participate in this year's Annual General Meeting, Evotec has re-scheduled the meeting to be held on August 28, 2008.
  
Clinical pipeline progressed

On July 3, 2008, Evotec reported top-line results of a double-blind, 4-week Phase Ib study with EVT 101, an orally active NR2B-subtype selective antagonist of NMDA receptors with potential in Alzheimer's disease, neuropathic pain and other indications. The study showed in both young and elderly subjects that the drug was well tolerated up to the highest dose tested.
On August 1, 2008, Evotec reported that Pfizer Inc. initiated a Phase I clinical trial of a small molecule VR1 (vanilloid receptor 1) antagonist under collaboration with Evotec. The Phase I study in healthy volunteers is intended to evaluate the compound's safety, tolerability and pharmacokinetic profile after oral administration.
Evotec will report results from the first exploratory Phase II, acute dose, craving study for EVT 302, a reversible and highly selective inhibitor of monoamine oxidase B (MAO-B) in development for smoking cessation, in the third quarter 2008. Ethical approvals for the EVT 302 proof-of-concept quit rate study have been obtained and final regulatory approval is expected shortly.
Evotec's proprietary P2X7 antagonist is on track to enter Phase I, in the third quarter of 2008. We will shortly submit the regulatory application to proceed with the first study in man to assess the safety, tolerability, pharmacokinetics and pharmacodynamics of our orally administered P2X7 receptor antagonist.

Jörn Aldag, President & Chief Executive Officer of Evotec AG, commented: "During the second quarter our clinical development programs continued to advance. In addition, we were pleased to announce that Pfizer had initiated a Phase I study with our VR1 receptor antagonist, one of the programs acquired with Renovis. With this acquisition we achieved an important milestone in our strategic transformation into a biopharmaceutical company. Four clinical candidates are now backed by a strong late stage preclinical pipeline and we are well positioned to partner key clinical programs with pharmaceutical companies. Partnering discussions with our lead compound EVT 201 for the treatment of insomnia are ongoing. Insomnia continues to be a difficult area for any partnering activities, in particular following the recent challenges faced by Gaboxadol, Indiplon and others. However, the co-development agreement announced by Actelion in July demonstrates that there is continued interest in this indication from the market. Successful partnering is our key objective as it is of significant importance to create value for our shareholders from both our discovery engine and our in-licensed products."
 
2008 financial targets
In 2008, the Company's revenues are expected to be within the range of EUR 34 million to EUR 36 million, not including any possible out-licensing income. In the absence of any impairment charges or out-licensing income, the 2008 operating result is expected to be in the same range as 2007. In the event of a successful out-licensing, operating results may significantly outperform 2007. Evotec continues to invest in research & development. The Company expects R&D expenses to be at the lower end of the EUR 46 to EUR 51 million range excluding the cost of share-based compensation to employees allocated to R&D in 2008. The increase from 2007 is mainly driven by progress in the clinical pipeline and the Renovis acquisition.
Our liquidity guidance at the end of 2008 was that cash would exceed EUR 85 million at constant 2007 currencies. This number excluded any favorable impacts of possible receipts from out-licensing payments in 2008. However, this 2008 year-end estimate translates to slightly over EUR 80 million at today's exchange rates. As mentioned above, Evotec including Renovis recorded approximately EUR 4.6 million in unrealized losses in the translation of liquid assets held in US dollars or UK Sterling into Euros in the first half of 2008. Our liquidity target, at today's exchange rate is EUR 80 million, and can be achieved despite the payment of EUR 2.7 million to Roche made in July 2008 related to the initiation of Phase II trials with EVT 302. We view the payment to Roche in cash instead of in equity favorably as it does not further dilute our existing shareholders given the Company's current share price. Assuming the Company's ambitious portfolio development goals and no major partnering event, the liquidity position is currently expected to be sufficient to fund Evotec's development programs until the end of 2010.
 
All 2008 results shown and discussed in this press release are compared to the 2007 continuing operations. On November 30, 2007 Evotec sold a major line of business, its Chemical Development Business, to Aptuit. From the effective date onwards, this business was no longer consolidated in the Evotec Group accounts and income and expenses for that business are retrospectively disclosed as discontinued operations in the statements of operations. In addition, on May 2, 2008, the Company completed the acquisition of Renovis, Inc. The operating results of Renovis from the period May 2, 2008 through June 30, 2008 are included in the accompanying consolidated interim statements of operation for the six months ended June 30, 2008 and the assets and liabilities of Renovis at June 30, 2008 are included in the accompanying consolidated interim balance sheet. Therefore, the 2007 and 2008 results are not fully comparable.
  
Conference Call
Evotec will hold a conference call today at 02.00 pm CET (01.00 pm BST/08.00 am US time East Coast) to discuss the financial results as well as progress of the first half 2008. Jörn Aldag, President & CEO, Dr Klaus Maleck, Chief Financial Officer, and Dr John Kemp, Chief Research & Development Officer, will lead the call.
 
Conference call details:
Date: Wednesday, August 6, 2008
Time:
02.00 p.m. CET
01.00 p.m. BST
08.00 a.m. US time (East Coast)
 
Conference call numbers:
Europe:
+49.(0)69.5007 1305 (Germany)
+44.(0)20.7806 1950 (UK)
US: +1.718.354 1385
Pass Code: 8300274
Webcast: www.evotec.com
 
A replay of the conference call will be available for 24 hours and can be accessed in Europe by dialing +49.(0)69.22222 0418 (Germany) or +44.(0)20.7806 1970 (UK) and in the US by +1.718.354 1112. The access code is 8300274#. The on-demand version of the webcast will be available on our website: www.evotec.com - Investors - Financial Reports.
 
 
Contact: Anne Hennecke, Senior Vice President, Investor Relations & Corporate Communications, Evotec AG, phone: +49-40-56081-286, anne.hennecke@evotec.com
 
Forward-Looking Statements
Information set forth in this press release contains forward-looking statements, which involve a number of risks and uncertainties. Such forward-looking statements include, but are not limited to, statements about our expectations and assumptions concerning regulatory, clinical and business strategies, the progress of our clinical development programs and timing of the results of our clinical trials, strategic collaborations and management's plans, objectives and strategies. These 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. In particular, the risks and uncertainties include, among other things: risks that product candidates may fail in the clinic or may not be successfully marketed or manufactured; risks relating to our ability to advance the development of product candidates currently in the pipeline or in clinical trials; our inability to further identify, develop and achieve commercial success for new products and technologies; competing products may be more successful; our inability to interest potential partners in our technologies and products; our inability to achieve commercial success for our products and technologies; our inability to protect our intellectual property and the cost of enforcing or defending our intellectual property rights; our failure to comply with regulations relating to our products and product candidates, including FDA requirements; the risk that the FDA may interpret the results of our studies differently than we have; the risk that clinical trials may not result in marketable products; the risk that we may be unable to successfully secure regulatory approval of and market our drug candidates; and risks of new, changing and competitive technologies and regulations in the U.S. and internationally.
The list of risks above is not exhaustive. Our Annual Report on Form 20-F, filed with the Securities and Exchange Commission, and other documents filed with, or furnished to the Securities and Exchange Commission, contain additional factors that could impact our businesses and financial performance. 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.
  
  

Half Year Report 2008
 
 
Key figures of consolidated interim statements of operations
Evotec AG and Subsidiaries
 
Euro in thousands except share data and per share data






 


Six months ended June 30,


Change in %


Three months ended June 30,


Change
in %




 


2008


2007*
restated


 


2008


2007*
restated


 




 


 


 


 


 


 


 




Total revenue


14,515


15,820


(8.2)


7,202


7,112


1.3




Gross margin


25.2


20.2


 


20.8


10.9


 




 


 


 


 


 


 


 




Research and development expenses


21,947


16,445


33.5


9,137


9,019


1.3




Selling, general and administrative expenses


8,065


8,711


(7.4)


4,720


4,723


(0.1)




Amortization of intangible assets


397


1,622


(75.5)


96


817


(88.2)




Restructuring expenses


130


-


-


14


-


-




Other operating income


1,077


886


21.6


655


439


49.2




Other operating expenses


1,074


864


24.3


694


426


62.9




  


  


 


 


 


 


 




Operating result**


(26,488)


(21,935)


(20.8)


(12,411)


(12,952)


4.2




 


 


 


 


 


 


 




Net income (loss)


(25,852)


(22,084)


(17.1)


(12,012)


(13,108)


8.4




 


 


 


 


 


 


 




Weighted average shares outstanding


83,686,845


69,755,846


 


93,505,244


71,414,444


 




Net income (loss) per share (basic and diluted)


(0.31)


(0.32)


 


(0.13)


(0.18)


 






*Excluding contributions from Evotec Technologies and the Chemical Development Business.
**Before amortization and impairment.
 
 
 
Key figures of consolidated interim balance sheets
Evotec AG and Subsidiaries
 
Euro in thousands






 


Jun 30, 2008


Dec 31, 2007


Change in %




 


 


 


 




Cash and cash equivalents, investments including auction rate securities


 
101,009


 
93,676


 
7.8




Net working capital


(5,427)


(4,336)


(25.2)




Current and non-current portion of loans and finance lease obligations


 
12,064


 
11,661


 
3.5




Stockholders' equity


192,908


170,553


13.1




 


 


 


 




Total assets


228,329


207,878


9.8