Evotec SE — Interim / Quarterly Report 2016

Nov 10, 2016

Leading R&D Efficiency & Accelerating Innovation – Building BRIDGES

Evotec AG, Nine-month 2016 Quarterly Statement, 10 November 2016

Forward-looking statements

Information set forth in this presentation 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 presentation. 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.

Note:

The 2015 and 2016 results are not fully comparable. The difference stems mainly from the acquisition of Evotec (France) SAS, effective 01 April 2015. While the results of Evotec (France) SAS are fully included in the accompanying consolidated income statement for the first nine months of 2016, they were not fully included in the comparable period of the previous year. In addition, effective 09 December 2015, Evotec acquired 51% of the shares in Panion Ltd., London, UK. This acquisition has been fully consolidated since that date. The accounting policies used to prepare interim information are the same as those used to prepare the audited consolidated financial statements for the year ended 31 December 2015.

Change in presentation:

The presented financial statements include a change in presentation in the first nine months of 2015 and 2016. From 01 January 2016 onwards, amortisation of intangible assets are no longer presented in a separate line in the consolidated income statement but are allocated to the relating cost lines in the income statement. The prioryear period was changed accordingly resulting in higher costs of revenue (€ 2.2 m).

Welcome

The Management Team

Agenda

Highlights 9M 2016

EVT Execute

EVT Innovate

Financial performance and outlook

The leading innovation efficient discovery platform

EVT Execute & EVT Innovate – The business model

Strong performance and new ways for innovation

First nine months of 2016 – State of play

EVT Execute

• Important milestone achievements
• New long-term strategic drug discovery alliances
• Continued good progress of operations in Toulouse
• Continued expansion of existing drug discovery platforms
• First Phase I clinical start for the treatment of endometriosis with Bayer

EVT Innovate

• New multi-target alliance with Bayer in kidney diseases
• First research collaboration under French Academic Bridge with Inserm
• Acceleration of TargetNASH programme
• Partnership with ex scientia to develop bispecific small molecule therapeutics
• Company formation of Topas Therapeutics
• Participation in Series A funding of Carrick Therapeutics
• LAB282: BRIDGE partnership with Oxford University, OSI and OUI (after period-end)

Strong growth trend continues

Financial highlights first nine months 2016 & Guidance 2016

Strong financial performance

• Group revenues up 37% to € 120.6 m (9M 2015: € 88.2 m)
• EVT Execute revenues up 36%
• EVT Innovate revenues up 26%
• Adjusted Group EBITDA1) at € 30.6 m
• Net income at € 11.4 m
• R&D expenses of € 12.8 m
• Strong liquidity position of € 120.0 m2)
• Significant reduction of loans

Confirmation of updated guidance 2016

• More than 15% revenue growth excluding milestones, upfronts and licences
• Adjusted Group EBITDA1) expected to more than double3) compared to 2015 (2015: € 8.7 m)
• R&D expenses of approx. € 20 m
• Similar level of liquidity4) compared to 2015
• Capex investments up to € 10 m

¹⁾ Before contingent considerations and excluding impairments on other intangible and tangible assets and goodwill as well as the total non-operating result 2) Year-to-date 2016, short and long-term debt was reduced by € 8.1 m.

³⁾ On 19 July 2016, Evotec raised its profitability guidance mainly as a result of an increased margin contribution and a positive outlook for the remainder of the year. 4) Excluding any potential cash outflow for M&A or similar transactions

Proposed acquisition of Cyprotex follows strategy

Strategy overview

Our "Sweet spot"

Generating the Pre-clinical Development Candidate (PDC)

Acquisition of Cyprotex expected to close still 2016

Summary and rationale of acquisition of Cyprotex

• World leader in pre-clinical ADME-Tox and DMPK testing1)
• 136 employees operating from 4 sites in the UK and USA
• H1 2016 revenues of ₤ 8.73 m (€ 9.78 m**); underlying EBITDA of ₤ 2.34 m (€ 2.62 m**)
• Listed on UK AIM market
• Strong addition to Evotec's drug discovery platform
• Strengthens EVT Execute stand-alone capabilities
• Early screening and predictive ADME accelerates early decision making in integrated drug discovery projects
• Offer: Issued share capital and funding of all existing debt of Cyprotex PLC for approx. ₤ 55.36 m (€ 62.0 m**) paid in cash
• Offer of 1.60 ₤/share represents a 9.4% premium to VWAP of past 30 trading days

• 50% Cyprotex shareholder irrevocables in place; intention to implement and secure transaction by a scheme of arrangement

• Full financial commitment for acquisition covered through Evotec's cash on balance sheet
• Acquisition adds high-quality revenue and accretive EBITDA
• If accepted by >75% of shareholders, deal should close by end of 2016

# RESEARCHNEVERSTOPS

Agenda

Highlights 9M 2016

EVT Execute

EVT Innovate

Financial performance and outlook

Strong growth in EVT Execute

EVT Execute – 9M 2016 versus prior-year period

• Increase in revenues attributable to growth in the base business, milestone achievements and three full quarters of Sanofi contribution
• Significant upswing of adjusted EBITDA mainly due to the strong growth in revenues and milestone payments
• 9M 2016 includes € 23.9 m of intersegment revenues

Most comprehensive platform in the industry

EVT Execute – Highlights first nine months of 2016

• Milestone achievements with Bayer, BI and Padlock
• Extension of drug discovery alliances (Genentech, Janssen Pharmaceutica NV)
• New long-term strategic drug discovery alliances (C4X Discovery, Antibiotic Research UK, UCB)
• New licences enhancing Evotec's platform (Trianni, CRISPR)
• Compound management gaining momentum (Pierre Fabre, UCB)
• Phase I clinical start in endometriosis in Bayer alliance
• Offer to acquire Cyprotex PLC (after period-end)

Integration of additional capacity works very well

Progress update Evotec (France)

• Evotec (France) 18-month retrospective
• Complex integration successfully ongoing
• Evotec is now fully independent and operational on site in Toulouse and increased headcount by >30% since April 2015
• Evotec fulfilled its commitment to further develop and sustain activity and employment on site in Toulouse
• Innovative partnerships, also with third parties
• Pipeline-building partnership (e.g. partnered Target X initiatives)
• Outsourcing partnerships (Sanofi, UCB, Pierre Fabre, Institut Claudius Regaud, …)

Well-balanced global customer mix

EVT Execute – Selected customer and revenue metrics

Revenues by customer segment ytd 20161) (in %)		Customer type ytd 20161) (in %)			Revenues by region ytd 20161) (in %)
Remaining Top 10-30 Customers	12% 16%	100%	Mid-sized Pharma Foundations	10% 16%	100%	ROW USA	41%	100% 1%
			Biotech	21%
Top 10 Long-term Strategic Alliances	72%		Top 20 Pharma	53%		Europe	58%

Outlook 2016

EVT Execute – Expected key milestones 2016

New long-term deals with large and mid-sized Pharma

Expansion of foundations and biotech network in USA/EU

New performance-based integrated technology/disease alliance

Milestones from existing alliances

Agenda

Highlights 9M 2016

EVT Execute

EVT Innovate

Financial performance and outlook

Strong revenue growth and focused R&D expenses

EVT Innovate – 9M 2016 versus prior-year period

• Revenue growth of 26% and improved adjusted EBITDA resulting from new partnerships signed in 2015
• No material change in R&D expenses
• Full impairment of EVT100 series (€ 1.4 m)2)

PAGE 17

¹⁾ Adjusted for changes in contingent considerations

²⁾ In Q1 2016, Evotec was informed by Janssen Pharmaceuticals, Inc. that Janssen intends to phase out the licence agreement regarding NMDA antagonist with effect from August 2016.

Constantly growing pipeline of co-owned product opportunities – more than 70

Partnership portfolio

	Molecule	Therapeutic Area/Indication	Partner	Discovery	Pre-clinical	Phase I	Phase II	Phase III
al c ni	EVT3021)	CNS – Alzheimer's disease
	EVT201	CNS – Insomnia
	EVT1001)	CNS – Depression
	EVT401	Immunology & Inflammation
Cli	ND2)	Oncology
	ND2)	Oncology
	Various	Women's health – Endometriosis
	ND2)	CNS – Pain
	ND2)	Immunology & Inflammation
al	ND2)	Oncology
c ni	EVT770	Metabolic – Diabetes (type 2/1)
cli	ND2)	Respiratory
e- Pr	ND2)	Immunology & Inflammation
	EVT801	Oncology
	EVT701	Oncology
	EVT601	Oncology
	ND2)	Nephrology						NEW
	Various	Immunology & Inflammation
	Various	Metabolic – Diabetes (type 2/1)
	Various	Metabolic – Diabetes (type 2/1)
	Various	Nephrology
y er	Various	Metabolic – Diabetes
v o	Various	CNS – Alzheimer's disease
c s	Various	Oncology – Immunotherapy
Di	Various	Immunology & Inflammation – Tissue fibrosis
	Various	CNS – Multiple Sclerosis	NEU2
	Various	Metabolic – Diabetes	>5 further programmes
	Various	CNS	>5 further programmes
	Various	Oncology	>10 further programmes
	Various	CNS – Pain & Inflammation	>5 further programmes

18 1) EVT302 and EVT100: Evotec has regained the licence rights and is currently assessing potential business opportunities

First-in-class and best-in-class approaches – New paths of sourcing innovation

EVT Innovate – Strategy highlights

New treatments to fight kidney diseases

Bayer & Evotec in CKD – Since 2016

Mission

Evotec and Bayer develop novel and highly innovative therapeutics in the field of kidney diseases such as chronic kidney disease ("CKD") in diabetes patients

Background1)

• CKD is a huge unmet medical need \$ 35 bn annual Medicare costs

• 10% of population worldwide is affected by CKD

• 2 million people worldwide currently receive dialysis treatments or a kidney transplant

• Alliance includes assets discovered within Evotec's CureNephron initiative

Agreement with Bayer

• Minimum of € 14 m including research payments and an undisclosed licence fee
• Potential pre-clinical, clinical and sales milestone payments of potentially over € 300 m; tiered royalties of up to a low doubledigit percentage of net sales
• Integrated collaboration with substantial efforts from both partners
• Strategic five-year collaboration

From Academia to transformative projects

Evotec's academic network continues to grow

• Carefully select projects in indications of high unmet medical need
• Dramatically reduce "search costs" for capital
• Advance projects to tangible value inflection points, i.e. licensing or spin-offs
• Put experienced "drug hunting" teams/projects together right from the start

EVT BRIDGE addresses challenges of innovation

EVT BRIDGE value proposition

Oxford BRIDGE "LAB282" is the first larger scale implementation of a BRIDGE fund

Partnership between Oxford University, OSI, OUI and Evotec

1) Oxford Sciences Innovation 2) ₤ 13 m 3) Oxford University Innovation Ltd 4) Proof of Concept

More than 10 projects primed for partnering

EVT Innovate – Cure X/Target X

2011	2012	2013	2014	2015	2016
CureBeta (Harvard Stem Cell Institute)	CureNephron (Harvard, BWH, USC, AstraZeneca, Bayer) TargetASIC (BMBF/undisclosed Pharma partner) Somatoprim (Cortendo) TargetPicV (Haplogen) TargetFibrosis (Pfizer)	TargetImmuniT (Apeiron/Sanofi) TargetDBR (Yale) TargetMB (Second Genome) TargetPGB (Harvard) TargetKDM (Dana-Farber, Belfer) TargetIDX (Debiopharm) CureMN (Harvard) TargetEEM (Harvard) TargetAD (NBB/J&J)	TargetBCD (Sanofi) TargetDR (Internal) TargetATD (Internal) TargetFX (Internal) TargetKX (undisclosed) TargetCytokine (DRFZ/BMBF) Various (Fraunhofer Institute)	TargetFRX (Internal) TargetNTR (Internal) TargetKras (OSU) Various (Gladstone Institutes) …	TargetaSN (MJFF) TargetBispecifics (ex scientia) TargetRhoB (Inserm) TargetNASH (Ellersbrook/ Internal) …

Efficient approaches for participation in first-in-class innovation

Strategic rationale & examples for Evotec's innovation acceleration

Accelerating innovation on EVT platform

• Spin off valuable platforms outside of Evotec's main areas of interest for potential broader/ later stage applications
• Participate in financing rounds of promising companies, built on EVT platforms, via strategic investments
• Company formations with the aim of developing assets to next value inflection points

Outlook 2016

EVT Innovate – Expected key milestones 2016

• New clinical initiations and good progress of clinical pipeline within partnerships
• Expansion of network of top-class academic alliances

Partnering of Cure X/Target X initiatives

Strong focus on iPSC (induced pluripotent stem cells) platform

Agenda

Highlights 9M 2016

EVT Execute

EVT Innovate

Financial performance and outlook

Significantly increased EBITDA

Key financials 9M 2016: Condensed income statement (IFRS)

in € m*
	YTD 2015	YTD 2016	% vs. 2015	 Revenue growth mainly due to an increase in base
Revenues	88.2	120.6	37%	revenues, full 9 months Sanofi contribution and
Gross margin	27.2%	38.5%	–	milestone achievements
 R&D expenses	(13.5)	(12.8)	(5)%	 Gross margin increase due to milestones, Sanofi
 SG&A expenses	(19.0)	(17.8)	(7)%	collaboration and higher base margin
 Impairment of intangible assets	(0.1)	(1.4)	–	 Decrease in SG&A due to
 Income from bargain purchase	18.5	–	–	one-off M&A and related costs in 2015
 Other op. income (expenses), net	2.4	6.0	–	 € 1.4 m for full impairment of EVT100 in 2016
Operating income	12.3	20.4	66%	 Bargain purchase of
Adjusted Group EBITDA1)	3.4	30.6	–	€ 18.5 m in 2015
Net income	10.7	11.4	7%	 R&D tax credits in UK and France (€ 2.9 m increase)

¹⁾ EBITDA in 2015 was adjusted for changes in contingent considerations as well as for one-time effects with regards to the bargain purchase resulting from the acquisition of Evotec (France) SAS in 2015.

Strong performance from both segments

Condensed income statement based on segments for 9M 2016

in € m*

	EVT Execute	EVT Innovate	Inter segment elimination	Evotec Group
Revenues	126.6	17.9	(23.9)	120.6
Gross margin	32.9%	45.6%	–	38.5%
 R&D expenses	(0.0)	(16.3)	3.5	(12.8)
 SG&A expenses	(13.9)	(3.9)	–	(17.8)
 Impairment of intangible assets	–	(1.4)	–	(1.4)
 Other op. income (expenses), net	5.3	0.7	–	6.0
Operating income (loss)	33.1	(12.7)	–	20.4
Adjusted EBITDA1)	41.3	(10.7)	–	30.6

• Strong base business and milestone achievements
• R&D expenses on similar level as in prioryear period
• Significantly improved adjusted EBITDA of EVT Execute compared to 9M 2015 (€ 16.1 m)
• Strong gross margin in EVT Innovate

Strong gross margin

Key financials Q3 2016: Condensed income statement (IFRS)

in € m
	Q3 2015	Q3 2016	Q3 2016 gross margin
Revenues	33.2	45.2	improved by milestone achievements and
Gross margin	29.2%	45.1%	improved capacity
 R&D expenses	(5.0)	(3.8)	utilisation
 SG&A expenses	(6.7)	(6.0)
 Other op. income (expenses), net	1.3	1.4
Operating income (loss)	(0.6)	12.0
Adjusted Group EBITDA1)	2.6	14.8
Net income (loss)	(2.9)	8.7

¹⁾ EBITDA in 2015 was adjusted for changes in contingent considerations as well as for one-time effects with regards to the bargain purchase resulting from the acquisition of Evotec (France) SAS in 2015.

Business grows and with improved gross margin

Revenues & gross margin trend 9M 2016

PAGE 31 1) In the first nine months of 2016, Sanofi contributed revenues of € 38.5 m. Excluding the Sanofi contribution, Evotec Group revenues increased by 29% compared to the prior-year period.

2) From 01 January 2016 onwards, amortisation of intangible assets are no longer presented in a separate line in the consolidated income statement but are allocated to the relating cost lines in the income statement. The 2014 and 2015 figures were changed accordingly.

Strong 2016, strong visibility and outlook for 2017

Expected key milestones 2016

EVT Execute

• New long-term deals with large and mid-sized Pharma
• Expansion of foundations and biotech network in USA/EU

Milestones from existing alliances

• New clinical initiations and good progress of clinical pipeline within partnerships
• Expansion of network of top-class academic alliances
• Partnering of Cure X/Target X initiatives
• Strong focus on iPSC (induced pluripotent stem cells) platform

Important next dates

Financial Calendar 2017

Annual Report 2016	28 March 2017
Quarterly Statement Q1 2017	10 May 2017
Annual General Meeting 2017	14 June 2017
Half-year 2017 Interim Report	10 August 2017
Quarterly Statement 9M 2017	08 November 2017