Evotec SE — Earnings Release 2012

May 11, 2012

Evotec AG

^< Recommendation: BUY(BUY)

Risk: Medium (Medium) Price Target: EUR 3.70 (3.70)

1Q/2012 Several events in the last weeks

• On 10 May Evotec published its 1Q/12 figures with strong top line growth but with a negative bottom line. Revenues for 1Q/12 increased to EUR 20.1m (2011: EUR 15.1m; +33%) including a milestone earned in Evotec's development partnership with Andromeda/Teva with DiaPep277 (EUR 3.9m) as well as contributions from the acquisitions of Evotec Munich and Evotec San Francisco totalling EUR 2.9m.
• Due to higher costs of revenue and higher OPEX, the net result was negative at EUR -2.0m. Liquidity including cash, cash equivalents and investments at the end of March 2012 amounted to EUR 57.1m excluding the milestone payment for DiaPep277 that was recorded as a receivable at 31 March 2012.
• Management confirmed the 2012 financial guidance. Revenues are expected to reach EUR 88-90m. R&D expenses in 2012 will remain broadly in line with 2011 levels at ~EUR 10m. Operating result for the year 2012 is expected to further improve over 2011. The guidance is realistic in our view; therefore we have not changed our estimates.
• Overall, despite the losses in 1Q/12, we are upbeat regarding the FY 2012 due to the following reasons: 1) Despite revenue increase resulted from the acquisitions in 2011, the organic growth in the top line is also very high ~15%; 2) According to management, order backlog is high, and currently on a record quarterly level, which we expect to propel company's revenue; 3) Several events took place during 2Q/12 such as strategic alliance with 4-Antibody AG for favorable financial conditions, 5-year compound management agreement with US EPA with a contract value of EUR 7.7m (USD 10m), extension and expansion of the collaboration with Active biotech and other events. Furthermore, we expect to see some more news during 2012.
• We leave our estimate and PT of EUR 3.70 unchanged and maintain BUY recommendation.

Y/E 31.12., EUR m	2009	2010	2011	2012E	2013E	2014E
Revenues	42.7	55.3	80.1	89.6	103.0	110.2
Gross profit	18.4	24.3	35.0	40.3	48.4	52.9
EBITDA	-38.2	6.5	11.4	14.6	20.3	21.9
EBIT	-42.3	1.7	5.2	9.0	13.3	14.7
Net income/loss	-45.5	3.0	6.7	7.2	10.8	12.1
EPS	-0.43	0.03	0.06	0.06	0.09	0.10
CPS	-0.20	0.00	0.07	0.07	0.14	0.14
Gross margin	43.2%	44.1%	43.7%	45.0%	47.0%	48.0%
EBITDA margin	-89.6%	11.7%	14.2%	16.3%	19.7%	19.8%
EBIT margin	-99.1%	3.1%	6.5%	10.1%	13.0%	13.3%
EV/Sales	5.4	4.2	2.9	2.6	2.3	2.1

Source: Evotec AG; CBS Research AG;

Share price (dark) vs. TecDAX

11 May 2012

Author Igor Kim (Analyst)

Close Brothers Seydler Research AG Phone: +49 (0) 69-977 84 56 0 Email: research@cbseydlerresearch.ag

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Recommendation System:

Close Brothers Seydler Research AG uses a 3-level absolute share rating system. The ratings pertain to a time horizon of up to 12 months:

BUY: The expected performance of the share price is above +10%. HOLD: The expected performance of the share price is between 0% and +10%. SELL: The expected performance of the share price is below 0%.

Recommendation history over the last 12 months for the company analysed in this report:

Date	Recommendation	Price at change date	Price target
13 May 2011	BUY (Company Update)	EUR 3.00	EUR 3.70
14 June 2011	BUY (Company Update)	EUR 2.71	EUR 3.60
11 August 2011	BUY (Company Update)	EUR 1.74	EUR 3.60
12 September 2011	BUY (Company Update)	EUR 2.28	EUR 3.60

27 October 2011	BUY (Company Update)	EUR 2.38	EUR 3.60
11 November 2011	BUY (Company Update)	EUR 2.59	EUR 3.60
11 January 2012	BUY (Company Update)	EUR 2.32	EUR 3.60
21 March 2012	BUY (Company Update)	EUR 2.92	EUR 3.70
02 May 2012	BUY (Company Update)	EUR 2.58	EUR 3.70
11 May 2012	BUY (Company Update)	EUR 2.37	EUR 3.70

Risk-scaling System:

Close Brothers Seydler Research AG uses a 3-level risk-scaling system. The ratings pertain to a time horizon of up to 12 months:

LOW: The volatility is expected to be lower than the volatility of the benchmark MEDIUM: The volatility is expected to be equal to the volatility of the benchmark HIGH: The volatility is expected to be higher than the volatility of the benchmark

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