Evotec OAI Updates Guidance for 2004 and Provides Preliminary Third Quarter Revenues

Hamburg, Germany | Oxford, UK - Evotec OAI AG (Frankfurt Stock Exchange: EVT, TecDAX 30) announces updates on 2004 financial guidance and provides preliminary third quarter revenues.
For the first nine months of 2004 revenues reached EUR 47.4 million (2003: EUR 56.7 million). In the third quarter, revenues amounted to EUR 16.1 million, down 26% over Q3 of the previous year (2003: EUR 21.9 million). The decline is mainly a result of a strong Q3 for Evotec OAI in 2003 due to above average sales in Evotec Technologies following the delivery of a suite of discovery instruments to Pfizer. The weak third quarter 2004 has been anticipated and communicated in our Q2 financial report. The 2004 sales and order book as of September amounted to EUR 71 million. Detailed Q3 results will be communicated with the full earnings report on 11 November 2004.
Jörn Aldag, President and Chief Executive Officer of Evotec OAI said: "In light of the Q3 results and the current status of contracted revenues and contract negotiations we are revising our revenue guidance for the year 2004 to approximately EUR 70 to 75 million. Timing risks of revenue recognition in our instrumentation business are the main reason for such a broad range. This means that in Q4 we will grow about 10 to 35% year on year. Based on this updated revenue guidance, currency effects and continued focused investments into our internal discovery efforts, EBITDA for 2004 is now expected to be between EUR -4 and -7 million.
In the first six months of 2004 the contract service industry experienced substantial downward pressure on revenues. We outpaced competition in this period significantly and we were successful in gaining business with many new customers. We are also making progress in our goal to shift focus to higher value strategic partnerships as witnessed by our new alliance with Boehringer Ingelheim and the progress in our metabolic disease venture."
Segment outlook 2004
1.      Discovery and Development Services (DDS)
During 2003 customers shifted their budgets heavily from preclinical discovery into clinical development. This led some of our long-term customers to scale-down or terminate discovery and development contracts which had a negative impact on Q1 sales for 2004. Although our business has recovered since then, we will not be able to compensate for this initial shortfall. Our 2004 order intake in September and early October was lower than planned, and this effect will result in lower 2004 numbers than expected. This updated situation may lead to a non-cash impairment of parts of our assets, in particular the goodwill in our balance sheet. The annual impairment review under US-GAAP is scheduled for the end of October. Our contract pipeline for 2005 for the services business is better today than it was for 2004 at the same time last year.
2.      Tools and Technologies (Evotec Technologies)
Evotec Technologies experienced a strong 2003 primarily on the basis of a single large contract with its EVOscreen® partner Pfizer. The challenge for 2004 has been to build on this success by gaining new customers to reduce the dependence on Pfizer and by introducing new products. We have mastered this challenge successfully. Yet, during the first nine months of 2004 instrument deliveries increasingly shifted into the fourth quarter. Consequently, there is a high risk that some of those revenues slip into next year. Nevertheless the company is on an extremely good track to build a strong and broad customer base among pharma, biotech and academic institutes. The build up of the first EVOscreen® uHTS screening centre in Asia is just one prominent example.
Aldag continued, "Evotec OAI has made important progress in all business units. We have advanced two out of four projects in our Metabolic Disease venture, which is part of our Discovery Programs Division, into lead optimisation. We have built momentum in our contract services business, both through new customers and innovative higher value deal structures. This is of utmost strategic importance to us in an environment where the traditional fee-for-service outsourcing business is under continued pressure. We are in a strong financial position to take the company forward and benefit from an industry upswing. While the environment is still challenging we are looking forward to a still very good Q4."
About Evotec OAI AG
Evotec OAI is a leader in the discovery and development of the next generation of novel small molecule based drugs through both contract research partnerships and discovery programmes for out-licensing. The company provides innovative solutions from Target to Clinic through an unmatched range of integrated capabilities ranging from assay development and screening through to medicinal chemistry and drug manufacturing. As a result, Evotec OAI has established itself as the partner of choice for pharmaceutical and biotechnology companies worldwide. With over 600 people located in Hamburg, Germany and near Oxford, UK, Evotec OAI is committed to generate value to its partners, shareholders and employees through a sustainable strategy that balances short-term and long-term business opportunities.

Contact: Anne Hennecke, Investor Relations & Corporate Communications, Evotec OAI AG, Phone: +49-40-56081-286, anne.hennecke@evotecoai.com
Contact: Anne Hennecke, Investor Relations & Corporate Communications, Evotec OAI AG, Phone: +49-40-56081-286, anne.hennecke@evotecoai.com