Evotec SE — Earnings Release 2011

Mar 20, 2012

News Details

Corporate | 20 March 2012 07:27

Evotec FY 2011: Significant Growth and Focused Investments Drive Profitability and Innovation

Evotec AG / Key word(s): Final Results

20.03.2012 / 07:27

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Hamburg, Germany – 20 March 2012: Evotec AG (Frankfurt Stock Exchange: EVT,

TecDAX) today reported financial results and corporate updates for the year

ended 31 December 2011.

* STRONG INCREASE IN 2011 REVENUES AND PROFITS; ALL FINANCIAL TARGETS MET

OR EXCEEDED

– Revenue growth of +45% to EUR 80.1m, gross margin at 43.7%

– Significantly increased profitability: Despite strategic impairments in

Q4, operating result of EUR 5.2m (+204%), net result of EUR 6.7m (+123%)

– Strong liquidity position of EUR 62m despite two acquisitions

* BROAD PORTFOLIO OF PERFORMANCE BASED DRUG DISCOVERY ALLIANCES: SOLID

BASIS FOR FURTHER GROWTH

– Multiple new alliances and contract extensions

* PROMISING NEAR-TERM PRODUCT DEVELOPMENT OPPORTUNITIES: SIGNIFICANT UPSIDE

WITHOUT FINANCIAL RISK

– Significant asset purchase agreement signed with Roche for

EVT302 in Alzheimer's disease

– Initial encouraging Phase III results for DiaPep277 in diabetes with

Andromeda/Teva; final data to be presented mid 2012

– EVT401 partnered with a leading animal health company

– Broad long-term pipeline of approx. 50 targets

* UPGRADING THE TECHNOLOGY PLATFORM AND INNOVATION OFFERING THROUGH

ACQUISITIONS, INVESTMENTS AND ALLIANCES

– Successful acquisitions of Kinaxo (Evotec Munich) and Compound Focus

(Evotec San Francisco) enhance drug discovery offering

– Acquisition of the remaining 30% of the equity of Evotec (India)

– Approx. EUR 10m technology infrastructure and upgrade investments

– EUR 8.4m focused investments in scientific innovation

– Harvard collaboration 'CureBeta'' in beta cell regeneration progressing

well; expanded strategic alliance with Harvard into Kidney Disease

'CureNephron' (after period end)

* GUIDANCE 2012 – DOUBLE-DIGIT GROWTH AND FURTHER INCREASED PROFITABILITY

– Continued double-digit revenue growth EUR 88 to 90m supported by strong

order book and good milestone opportunities

– Further increased operating result – Strong strategic  liquidity position

above EUR 60m, despite significant investments

* EVOTEC ACTION PLAN 2016 – INNOVATION EFFICIENCY; SETTING THE STAGE FOR

LONG-TERM LEADERSHIP IN DRUG DISCOVERY SOLUTIONS

– Action Plan 2012 successfully completed

– Action Plan 2016: Double digit y-o-y growth  with extended offering for

Innovation Efficiency; Accelerated innovation; Improved quality of revenue

mix through milestone, service income and royalty latest by 2016

1. Operational performance

Revenue growth of 45%, significantly increased operating result, all

financials in line with or above guidance

In 2011 the Company delivered on all financial targets and also exceeded

the guidance raised at the time of its announcement of the EVT302-agreement

with Roche. Revenues increased 45% over the same period of the previous

year to EUR 80.1m (2010: EUR 55.3m). Growth was driven by a strong

performance in the Company's drug discovery alliances as well as EUR 6.9m

upfront payment from Roche in context of the development partnership in

Alzheimer disease with EVT302. Revenues included significant milestone

payments and licenses received from e.g. Boehringer Ingelheim, Ono

Pharmaceutical, and Shionogi in the amount of EUR 12.4 m (2010: EUR 10.9

m). Despite the significant increase in sales, the gross margin for the

Group remained essentially stable at 43.7% (2010: 44.1%), despite Evotec's

acquisitions of lower margin compound management business since June 2011.

Due to the strong top-line performance and judicious cost containment in

line with 'Evotec Action Plan 2012' Evotec's operating result increased

significantly to EUR 5.2m in its second full year of operating

profitability (2010: EUR 1.7m). The net result increased by 123% to

EUR 6.7m (2010: EUR3.0m). Operating Income increased significantly despite

the strategic impairment of certain assets on the balance sheet (EVT201

with EUR 2.1m), and the significant investments especially in Q4 in the new

'Manfred Eigen Campus' in Hamburg.

As forecasted, internal Research & Development (R&D) expenditure rose by

38% to EUR 8.4m in 2011 (2010: EUR 6.1m). The increase was mainly due to

full year contribution of Evotec Göttingen and from the acquisition of

Kinaxo (Evotec Munich). Including the progression of the Evotec CureBeta

franchise, as well as expenses for pre-clinical development of EVT501 (H3

antagonist). R&D expenses, however, still remained significantly lower and

more focused than in the previous years. Evotec continued to follow its

strategy of spending only on selected discovery projects in key medical

areas. Clinical trials will be conducted only in partnerships with

pharmaceutical companies.

Although Evotec invested EUR 8.4m in unfunded research, EUR 8.1m in

infrastructure upgrades and EUR 26.6m (partly paid in shares) in two

strategic acquisitions, the Company ended 2011 with a strong liquidity

position of EUR 62.4m (2010: EUR 70.4m), which is composed of cash and cash

equivalents (EUR17.8m) and of investments (EUR 44.6m) and thereby

maintained its liquidity target of > EUR 60m.

2. Update on discovery alliances

Evotec's strategy is to build innovative, performance-based drug discovery

alliances. The need to improve R&D productivity is increasing pressure on

pharmaceutical companies to outsource drug discovery and development. There

is a clear trend towards large, multi-year contracts within a full-service

outsourcing model. Evotec is one of the few drug discovery businesses that

can execute a comprehensive outsourcing strategy, because it is able to

undertake and integrate all parts of the drug discovery process.

The Company is now working with more than 20 pharma and biotech companies

on a global scale. In 2011, new collaborations were announced with Active

Biotech, Apeiron Biologics, Avixgen, NoNo, Roche, Takeda Cambridge, and

UCB; contract extensions were signed with Ono Pharmaceutical, Cardioxyl,

Epizyme and Epitherapeutics. With these deals the Company further

strengthened its customer and revenue base and improved the foundation for

further future growth.

At least equally important as the number of new collaborations and contract

extensions is the further strategic development of Evotec's existing core

alliances. The Company aims to strategically develop its large strategic

alliances and deliver innovation as the core of all its partnering

activities. In 2011, revenues from Evotec's TOP 10 customers grew by 35%.

3. Progress in development partnerships

Evotec continues to minimise any significant clinical risk and will run

clinical development programmes only in partnerships in which a

pharmaceutical company is funding the later- stage clinical trials.

EVT302, a MAO-B inhibitor, was partnered under an exclusive global

licensing agreement with Roche for the development of treatments for

Alzheimer's disease. Under the terms of the agreement, Roche paid Evotec an

upfront fee of $10m (EUR 6.9m) and Evotec could receive further development

and commercial milestone payments of up to

$ 820m as well as tiered double-digit royalties on sales. Roche will

initiate Phase IIb studies with EVT302 in 2012 to demonstrate

proof-of-concept.

DiaPep277 with Andromeda/Teva for type I diabetes delivered first positive

and promising Phase III results. The first Phase III study with

DiaPep277was largely completed in 2011 and met all its Phase III endpoints.

The next milestone for Evotec is triggered upon final completion of the

report of this Phase III study and continued clinical development, which is

expected in 2012. Good progress was achieved during the year with EVT401, a

P2X7 antagonist for the treatment of inflammatory diseases which was

partnered with a leading animal healthcare company.

The partnership with Zhejiang Jingxin Pharmaceutical Co., Ltd for EVT201

for insomnia is ongoing in China.

The clinical stage pipeline included also a significant setback in the

development of EVT101/103 for treatment resistant depression. In May, Roche

terminated the Phase II clinical trial with EVT101/103, and decided not to

exercise an option to acquire the rights on the compounds. Evotec now

retains all rights in the EVT100 series and continues to have partnering

discussions for the continued clinical development of these assets.

4. Acquisitions, investments and partnerships opening new routes of growth

and scientific innovation

In order to accelerate the drug discovery process with the best possible

tools available Evotec is continually upgrading its technology platform

through the acquisition of tangible assets and investments in companies.

The major two acquisitions totalling EUR 26.6m (partly shares) included the

small molecule compound management business of Compound Focus (Evotec San

Francisco) and the chemical proteomics technologies of Kinaxo (Evotec

Munich) applicable to drug response prediction as well as drug efficacy and

safety assessment. In addition, Evotec acquired the remaining 30% of the

equity of Evotec (India) Private Limited, its Indian medicinal chemistry

operation, expanding its global scientific resource to offer the most

complete and cost efficient drug discovery solutions.

Further capital investments were made in expanding and upgrading its

capabilities in screening, protein production, structural biology, and

chemical proteomics. A major part of this strategy was the move into a new

high-tech facility in Hamburg 'Manfred Eigen Campus', which will be the

centre for Evotec's screening and pharmacology.

To keep the Company at the forefront of scientific innovation and to drive

early stage collaborations, Evotec focuses on developing early assets and

invests in highly innovative approaches to address key therapeutic areas

and markets, e.g. beta cell technology and technologies that facilitate

drug discovery in oncology or metabolic  and kidney diseases. One such

example is the collaboration with Harvard University and the Howard Hughes

Medical Institute (HHMI) signed in March 2011. The initial goal of this

collaboration is to pursue a comprehensive and systematic approach towards

the identification and development of physiological mechanisms and targets

that regulate beta cell replication 'CureBeta' to discover and develop new

treatments for diabetes. In the field of diabetic complications, Evotec is

currently also focusing on chronic kidney disease by designing screens and

assays geared towards the identification of mechanisms and targets that

protect and/or regenerate key cell types affected during disease

progression 'CureNephron'. To drive this initiative, Evotec announced a

second strategic alliance with Harvard University in January 2012 (after

period end). The early assets and targets from such research will be

actively partnered with third parties.

5. Guidance 2012

Double digit revenue growth, improved operating result and strong liquidity

of above EUR60 m

In 2012, double-digit growth of Group revenues is expected to reach

EUR 88 to 90m. This assumption is based on a strong order book, expected

new contracts and contract extensions as well as good milestone

opportunities. Evotec expects R&D expenses in 2012 to remain broadly in

line with 2011 levels at approximately EUR 10m. The Company will continue

to focus on first-in-class innovation. On that basis Evotec's Group

operating result before impairment and changes in contingent consideration,

if any, for the year 2012 is expected to further improve over 2011.

In 2012, Evotec will invest to support its long-term growth aspirations.

This will be reflected in another year of significant investment in capital

expenditures, even exceeding the high levels of 2011. More than EUR 10m are

planned to be invested in the long-term upgrading of Evotec's capacities.

The Evotec Group started 2012 with more than

EUR 60m of cash and cash equivalents as well as investments. In 2012,

top-line growth is expected to generate a positive operating cash flow. A

significant proportion of the cash generated will be reinvested into the

upgrading of capacities, as a consequence, at constant year-end 2011

currencies, the Company expects to maintain its liquidity above EUR 60m at

the end of 2012, excluding any potential cash outflow for M&A transactions

and related payments.

6. Action Plan 2016

Setting the stage for long-term leadership in drug discovery solutions

'Evotec 2012 – Action Plan to Focus and Grow' has been successfully

completed and delivered all its strategic results. Evotec has managed to

stop the cash outflow of previous years and is now 'cash neutral/positive',

despite significant capital expenditures and its continued commitment to

R&D. With 'Action Plan 2016 – Innovation Efficiency' Evotec has now defined

the next goals the Company wants to achieve in the years to come. Three key

building blocks (EVT Execute, EVT Integrate, EVT Innovate) will help Evotec

to achieve long-term leadership in the drug discovery solutions market and

continue to drive strong double digit y-o-y growth in revenues and strong

profitability to 2016.

Webcast / Conference Call

Evotec will broadcast its press & analyst conference in Frankfurt live on

the internet. The Management Board will inform you about the FY 2011

results as well as update you on the status of 'Evotec 2012 – Action Plan

to Focus and Grow', introduce the 'Action Plan 2016 – Innovation Efficiency

in Drug Discovery' and present an outlook for the fiscal year 2012.

Date: Tuesday, 20 March 2012

Time: 9.30 am CET (08.30 am GMT/04.30 am EDT)

To join the audio webcast and to access the presentation slides you will

find a link on our home page www.evotec.com shortly before the event.

For those who prefer to listen to the presentation via phone, please dial:

From Germany: +49 (0)69 20 17 44 210

From UK:             +44 207 153 9154

From USA:           +1 877 423 0830

Access Code: 605956#

A replay of the conference call will be available for 24 hours and can be

accessed in Europe by dialing +49 (0)69 20 17 44 222 (Germany) or +49 (0)69

20 17 44 221 (UK, USA). The access code is 343184#. The on-demand version

of the webcast will be available on our website: www.evotec.com – Investors

– Events – Financial Calendar.

Fiscal Year 2011 Results

Key Figures of Consolidated Income Statements

Evotec AG and Subsidiaries

Euro in thousands except share data and per share data

	January to	December
	2011	2010	Change in %
Revenues	80,128	55,262	45
Gross margin in %	43.7	44.1
Research and development expenses	8,437	6,116	38
Selling, general and administrative expenses	15,760	15,956	(1)
Amortisation of intangible assets	1,703	672	153
Impairment of intangible assets	2,058	–
Reversal of impairment of intangible assets	1,501	–
Other operating income	1,426	4,536	(69)
Other operating expenses	4.747	4.423	7
Operating income	5,207	1,715	204
Operating income*	5,764	1,715	236
Net income	6,651	2,985	123
Weighted average shares outstanding	116,022,213	109,012,908
Net income per share (basic and diluted)	0.06	0.03	100

* Before impairment and reversal of impairment.

Key Figures of Consolidated Statement of Financial Positions

Evotec AG and Subsidiaries

Euro in thousands

	31 Dec 2011	31 Dec 2010	Change in %
Cash and investments	62,428	70,401	(11)
Working capital	(8,722)	(5,039)	(73)
Current and non-current portion of loans and finance lease obligations	15,566	11,997	30
Stockholders' equity	147,245	132,637	11
Total assets	218,213	191,859	14

Contact Evotec AG:

Dr Werner Lanthaler, Chief Executive Officer, Phone: +49.(0)40.56081-242,

werner.lanthaler@evotec.com

FORWARD LOOKING STATEMENTS – Information set forth in this press

release contains forward-looking statements, which involve a number of

risks and uncertainties. The forward-looking statements contained herein

represent the judgement of Evotec as of the date of this release. Such

forward-looking 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. 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.

End of Corporate News

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Language:	English
Company:	Evotec AG
	Manfred Eigen Campus / Essener Bogen 7
	22419 Hamburg
	Germany
Phone:	+49 (0)40 560 81-0
Fax:	+49 (0)40 560 81-222
E-mail:	info@evotec.com
Internet:	www.evotec.com
ISIN:	DE0005664809
WKN:	566480
Listed:	Regulierter Markt in Frankfurt (Prime Standard); Freiverkehr in Berlin, Düsseldorf, Hamburg, Hannover, München, Stuttgart

End of News	DGAP News-Service

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