Evotec SE — Earnings Release 2002

Mar 25, 2003

News Details

Corporate | 25 March 2003 09:10

Evotec OAI AG english

Evotec OAI-Financial Results 02: Sustained Growth in Challenging Markets Corporate-news announcement sent by DGAP. The sender is solely responsible for the contents of this announcement. ——————————————————————————– Evotec OAI (WKN 566480) today announced financial results for the year ended 31 December 2002. Financial Highlights: . Group Revenues EUR 70.0 million, up 11% . Discovery and Development Services revenues EUR 58.6 million, up 13% . EBITDA EUR (2.2) million, exceeding company October 2002 guidance (EUR (3) to (6) million); positive EBITDA in Q4 2002 . Strong liquidity build-up towards 2002 year end to EUR 21.3 million . 2003 order book of EUR 57 million as of February 2003, representing73% of analysts’ revenue forecasts . On track for positive EBITDA in 2003 Operational Highlights: . New three-year agreement signed with Pfizer . Innovative three-year agreement as preferred supplier to portfolio companies of Oxford Bioscience Partners . Network of broad customer relationships expanded by more than 40 new clients . First clinical milestone achieved from collaboration with Vertex . Major building project started in Abingdon to expand Medicinal Chemistry capacity . Organisational spin out of Evotec Technologies completed . Discovery Programs Division established Operational Review The Company made significant progress in 2002, despite an unprecedentedly challenging year for the biotechnology and pharmaceutical industries. Against this background we continued to develop our position as the preferred provider of services for the life sciences research industry, and to add to our unmatched network of customers, which now totals more than 120. We extended our multi- year partnerships with companies including Pfizer, Roche, Amgen and Solvay Pharmaceuticals and thereby again achieved significant growth in discovery services. We extended our long-term assay development and technology partnership with Pfizer for another three years. A contract value potentially in excess of US- Dollar 25 million makes this extension significantly larger than the original agreement signed in 1999. We also signed an innovative three-year umbrella agreement with Oxford Bioscience Partners (OBP), a U.S. venture capital firm, positioning us as the preferred supplier and discovery partner for many of OBP’s portfolio companies. The arrangement encourages this group of venture-stage companies to outsource activities that lie outside their core expertise rather than build in-house discovery capabilities, and we have already signed agreements with Elixir Pharmaceuticals, Psychiatric Genomics and Dynogen Pharmaceuticals. The quality and value of our contract research was underlined by the first clinical milestone from our collaboration with Vertex. As part of our strategy of focusing Evotec OAI on drug discovery, we completed the spin out of our instrumentation and technology business into the majority- owned subsidiary, Evotec Technologies GmbH (ET). As part of the contract extension with Pfizer, Pfizer decided to acquire a 10% stake in ET. In parallel, Discovery Programs was established as a new division in 2002, which engages in selected discovery activities to develop compounds for out-licensing. Financial Review Despite the difficult market conditions described above, total revenues increased by 11% to EUR 70.0 m (2001: EUR 63.2 m). While the growth rate for the first half of the year was in line with our target of 20% to 30% annual growth, a broad deterioration in market conditions affected many of our customers later in the year. Biotech companies delayed R&D spending decisions to conserve cash, and pharmaceutical companies also restricted spending. With a substantial amount of revenues generated in sterling, the weakness of the British pound against the euro also affected performance, reducing reported revenues by EUR 1.6 m compared with 2001 exchange rates. The operating loss was EUR 135.5 m (2001: EUR 152.5 m), an improvement of 11%, largely due to the discontinuation of goodwill amorti-sation offset by impairment of goodwill. Operating losses before amortisa-tion or impairment of goodwill and other intangible assets amounted to EUR 14.1 m (2001: EUR 12.3 m). This increase was primarily due to a different sales mix, resulting in lower gross margins of 45% (2001:47%), and planned idle capacity costs at our new pilot plant. Earnings before interest, tax, depreciation and amortisation or impairment (EBITDA) totalled EUR -2.2 m, only slightly below last year’s level (2001: EUR (1.0) m) and significantly better than our October 2002 guidance (EUR (3) to (6) m). Cash flow from operating activities amounted to EUR -1.0 m (2001: EUR -2.5 m). Cash consumption was mainly driven by R&D spending, slightly lower gross margins and increased inventories, primarily as a result of existing customer contracts with Merck and Pfizer. These were however largely offset by reduced trade accounts receivables. At 31 December 2002, our cash and cash equivalents totalled EUR 21.3 m, up from EUR 14.9 m at the end of Q3 2002. The net loss for the year, including the non-cash effects relating to the impairment of goodwill and other intangible assets, improved to EUR 131.6 m (2001: EUR 147.8 m). Goodwill amortisation/impairment. At a first review of our goodwill as of 1 January 2002, we saw no indica-tion for an impairment charge. In light of the developments in the financial and customer markets and with the decline of our market capitalisation, we decided to perform a second impairment review as of 31 October 2002 and indicated in our Q3 report that we expect to impair EUR 110 to 130 m in Q4. This prudent review finally resulted in a non-cash impairment charge of EUR 109.4 m in Q4 2002. This is less then the goodwill amortisation which we would have accounted for under the rules prior to the changes of US- GAAP literature, when we amortised goodwill over a three-year period, incurring annually EUR 127.6 m goodwill amortisation. Outlook. We expect to achieve growth of 10-15% in 2003, assuming that the outsourcing market remains weak. However, we continue to believe that we can reach mid- to long-term growth of 20%-30% p.a., once the markets recover. As of February, the order book for 2003 amounted to EUR 57 m, covering 73% of current analyst revenue expectations for 2003 (analyst consensus: EUR 78 m). This compares favourably to contracted 2002 revenues of EUR 37 m at the same time in 2002. With our strong order position and stringent cost management, the Company is on track to reach its target of positive EBITDA in 2003. end of message, (c)DGAP 25.03.2003 ——————————————————————————– WKN: 566480; ISIN: DE0005664809; Index: TecDAX, NEMAX 50 Listed: Geregelter Markt in Frankfurt (Prime Standard); Freiverkehr in Berlin- Bremen, Düsseldorf, Hamburg, Hannover, München und Stuttgart 250910 Mär 03