Evotec SE — Earnings Release 2011

Feb 10, 2011

EQUITY RESEARCH +++URGENT+++ COMPANY ALERT COMPANY Company Alert Evotec RATING BUY (UNCHANGED) Company Update:Acquisition of Kinaxo fits well TARGET PRICE 3.7 EUR (3.3 EUR) HIGHLIGHTS ß Acquisition price of EUR 12m + 4m success based payments ß Kinaxo: sales EUR 2.5m (+30% yoy, break-even at oper. level ß Evotec EBIT weighed by integration costs of EUR 4m in 2011 +++ Reuters: EVTG +++ Bloomberg : EVT GY ++ + Current Price (XETRA (Germany); 2011-02-10; 09:16 am) ......3.34 EUR CLOSING PRICE (2011-02-09):...................................... 3.33 EUR EXPECTED PERFORMANCE: ................................................11.2% MARKET CAPITALIZATION: .................................. 384.68 EUR m ENTERPRISE VALUE:.............................................. 332.93 EUR m

• ß 1st guidance: Sales and liquidity of EUR 64m+ in 2011
• ß Target price raised from EUR 3.30 to 3.70

Evotec acquired Munich-based privately held Kinaxo (25 FTEs) which is focussed on the investigation and identification of kinases, a class of proteins involved in the formation of cancer and inflammation. Kinaxo recently announced partnerships with AstraZeneca, BMS, Daiichi-Sankyo, Roche and Boehringer. Most of these partners have also ongoing cooperations with Evotec. In our view, the integration fits well into the assay portfolio of Evotec offered to customers for the selection of drug candidates.

Kinaxo expects sales of EUR 2.5m in 2011 and might grow 30% yoy mainly due to new contracts. The purchase price of EUR 12m consists of EUR 3m cash and 2.6m new shares valued at EUR 3.4m (2,2% of total EVT shares) plus EUR 4m of success-based payments and should be closed in April. New Evotec shares are subject to a lock-up period. The price for Kinaxo with a PSR of 4.8-6.4 seems to be justified as the company operates at break-even and offers large synergies to existing and new customers. However, Evotec will also account EUR 4m in transaction and integration costs in 2011.

For 2011 we see 4% higher sales (Evotec's new sales guidance is EUR 64m+), slightly lower COGS and increase of R&D and SG&A expenses. The decline of EBIT and net result is due to the additional integration costs of EUR 4m. Despite the acquisition cash at end of 2011 is expected to exceed EUR 64m. For 2012, we see additionally synergies that should increase EBIT and net result significantly.

We raise our target price from EUR 3.30 to 3.70 and confirm our BUY rating.

Forec ast revisions	2011e	2011e	Delta	2012e	2012e	Delta
EURtsd	new	old		new	old
Reven ues	65.166	62. 666	4,0%	73. 833	69.700	5, 9%
EBITDA	3 .213	7.421	-56,7%	10. 575	9.300	13,7 %
EBIT	323	2.921	-88,9%	7.665	5.500	39,4 %
Net result	249	2.126	-88,3%	5.964	4.200	42,0 %
EPS (EUR)	0,00	0,02		0,05	0,04	28,8 %

Current Price (XETRA (Germany); 2011-02-10; 09:16 am) 3.34 EUR
CLOSING PRICE (2011-02-09): 3.33 EUR
EXPECTED PERFORMANCE: 11.2%
MARKET CAPITALIZATION: 384.68 EUR m
ENTERPRISE VALUE: 332.93 EUR m
NUMBER OF SHARES: 115.59 m
FREE FLOAT: 70.0 %
INDEX (WEIGHT): TecDAX (1.59 %)
AVG. DAILY TRADEVOL.: 414,708
ISIN: DE0005664809
SECTOR: Biotechnology

KEY DATA (DEC)	2010EX	2011E	2012E
Company figures in m EUR, per share data in EUR
Sales	54.4	65.2	73.8
EBITDA	3.3	3.2	10.6
EBIT	0.4	0.3	7.7
Net profit	0.1	0.2	6.0
Free cash flow	-20.6	9.6	14.4
FCF yield	-5.0 %	2.0 %	4.3 %
EPS	0.00	0.00	0.05
Dividend	0.00	0.00	0.00
EV / Sales	6.1	5.1	4.5
EV / EBITDA	68.8	263.5	26.4
EV / EBIT	n.m.	n.m.	43.4
P / E	n.m.	n.m.	64.6
P / BV	2.85	3.24	3.08
Dividend yield	0.0 %	0.0 %	0.0 %

PRICE PERFORMANCE

2011-02-10 +++ 09:18 AM GMT +++ FOR DISCLAIMER AND IMPORTANT DISCLOSURES PLEASE SEE APPENDIX-1

EQUITY RESEARCH COMPANY ALERT

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Appendix-1 2/2

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LBBW Research Rating-Systematics (absolute share rating system)

Rating definitions:			Percentage of companies within this rating category
Buy:	Based on a time horizon of up to 12 months, we recommend that investors	Buy:	48,3%
	buy the stock.
Sell:	Based on a time horizon of up to 12 months, we recommend that investors sell the stock.	Sell:	5,0%
Hold:	We take a neutral view on the stock and, based on a time horizon of up to 12 months, do not recommend either a Buy or Sell.	Hold:	45,8%
Under review:	The rating is currently updated.	Under review:	0,5%
Suspended:	The evaluation of the company is currently not feasible.	Suspended:	0,5%

Notes: Rating definitions prior to 6th April, 2009 were:

Buy: The price potential of the share is at least 10%. Hold: The price potential of the share is between 0% and 10%. Sell: A negative price performance of the share is expected. Ratings relate to a time horizon of up to 6 months.

For disclosures pertaining to recommendations or estimates made on securities research, please see the most recently published company report or visit our website at http://www.lbbw.com/disclosures

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