Evotec SE — Interim / Quarterly Report 2017

Aug 10, 2017

Leading External Innovation Execute on Innovate

Evotec AG, H1 2017 Interim Report, 10 August 2017

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 2016 and 2017 results are not fully comparable. The difference stems from the acquisition of Cyprotex PLC ("Cyprotex"), effective 14 December 2016. The results from Cyprotex are only included from 14 December 2016 onwards. The accounting policies used to prepare the half-year report are the same as those used to prepare the audited consolidated financial statements for the year ended 31 December 2016.

Welcome to H1 2017

Your Management Team

Agenda

Highlights H1 2017

EVT Execute

EVT Innovate

Financial performance and outlook

Strong operations for accelerated innovation

First six months 2017 – State of play

EVT Execute

• Multiple new and extended integrated drug discovery agreements
• Significant progress within ongoing alliances
• Cyprotex with strong start
• Alignment for optimal US footprint
• Start of second clinical Phase I study in endometriosis alliance with Bayer (after period-end)

EVT Innovate

• Important milestone achievements
• Strong focus on iPSC platform (Censo Biotechnologies; Fraunhofer (after period-end))
• Unique biobank approach through NURTuRE consortium in kidney diseases
• BRIDGE model gaining momentum
• Grant from IFB Hamburg in immunotherapy/immunooncology

Corporate

• New strategic long-term investor: Novo Holdings A/S
• New Supervisory Board member (Michael Shalmi, Novo Holdings A/S)
• Continued high-value strategic investments and company formations (e.g. Forge Therapeutics, Eternygen, Facio Therapies)
• Acquisition of Aptuit (after period-end) – Closing expected in Q3 2017

Financials reflect strong business performance

Financial highlights H1 2017 & Guidance 2017

Financial performance further improved

• Group revenues up 37% to € 103.4 m (H1 2016: € 75.5 m)
• EVT Execute revenues up 26% to € 100.4 m1)
• EVT Innovate revenues up 78% to € 21.1 m
• Adj. Group EBITDA2) up 64% to € 26.0 m (H1 2016: € 15.8 m)
• EVT Execute adj. EBITDA up 26% m to € 28.4 m
• EVT Innovate adj. EBITDA of € (2.4) m
• R&D expenses at € 8.5 m
• Strong liquidity position of € 187.0 m (before Aptuit acquisition)

Guidance 2017 comfortably confirmed

• More than 15% Group revenue growth3)
• Adjusted Group EBITDA significantly improved compared to prior year
• R&D expenses of approx. € 20 m

3) Revenue guidance from 2017 onwards will be based on total Group revenues and not on base revenues excluding milestones, upfronts and licences.

¹⁾ Before intersegment consolidation

²⁾ Before contingent considerations, income from bargain purchase and excluding impairments on goodwill, other intangible and tangible assets as well as the total non-operating result

Clear vision to lead external innovation

Strategic long-term plan

Building highest quality integrated platform

Constant upgrade and improvement of technologies

	Compound Focus
2010	2011	2011	2012	2013
TI/TV platform in diabetes/ metabolic disease	Comprehensive compound/library management	Versatile proteomics platform, compound profiling, biomarkers	Rapid Fire/ MS screening	Access to patient derived iPS cell lines
Target ID/ Compound Assay Lead Screening Pre-clinical validation management development optimisation
		Evotec (France)
2013	2014	2015	2016	20171)
Customised cell based assays and cell lines	Validated portfolio of assays and disease models	Comprehensive com pound/library man agement capabilities	In vitro ADME-PK services	INDiGO® (IND en abling), drug discovery and high-end CMC2)

¹⁾ Acquisition of Aptuit announced on 30 July 2017; Closure of transaction expected in Q3 2017 2) Chemistry, Manufacturing and Controls

Recent acquisitions strengthen offerings significantly

Significant operational benefits from acquisition1)

EVT Execute

"Expansion along logical next steps of outsourcing value chain"

EVT Innovate

"Scale and leverage for high risk – high reward biotech business"

EVT Execute

• Leading integrated offering in industry "under one roof" and "within one network"
• Unique INDiGO® increases efficiency for partners, high-end CMC allows fully integrated process
• In vitro ADME-PK services with Cyprotex
• CMC capabilities

EVT Innovate

• Expanding leadership in iPSC platform
• Platform accelerates and de-risks clinical asset progress and supports EVT Innovate with INDiGO®
• DD capacity expedites larger cooperation projects and adds new fields of expertise

Agenda

Highlights H1 2017

EVT Execute

EVT Innovate

Financial performance and outlook

Strong business momentum

EVT Execute – Key performance indicators H1 2017

• Increase in EVT Execute revenues attributable to strong growth of the base business and milestones
• Cyprotex contribution to revenues of € 12.3 m in H1 2017 – ahead of budget
• Significant upswing of adjusted EBITDA mainly due to strong growth in revenues at higher gross margin and milestone achievements

¹⁾ Including intersegment revenues

²⁾ Before contingent considerations, income from bargain purchase and excluding impairments on goodwill, other intangible and tangible assets as well as the total nonoperating result

Continued well balanced customer mix

EVT Execute – Selected customer and revenue metrics

Strong growth trend continued also in Q2 2017

EVT Execute – First half of 2017

• Multiple new and extended integrated drug discovery agreements (e.g. Dermira, Asahi Kasei, Blackthorn Therapeutics, STORM Therapeutics (after periodend))
• Significant progress within ongoing alliances (e.g. Bayer alliance in endometriosis)
• Cyprotex with strong start
• Alignment for optimal US footprint
• Acquisition of Aptuit (after period-end)

Global centres of excellence for external innovation

Evotec's global footprint post Aptuit integration1)

Princeton, Watertown, Branford (USA)	Abingdon/ Alderley Park (UK)	Toulouse (France)	Verona (Italy), Basel (CH)	Hamburg (HQ), Göttingen, Munich (Germany)
~110 employees	~570 employees	~300 employees	~590 employees	~430 employees
 Compound ID, selection and acquisition  Compound QC, storage and distribution  Cell & protein production  ADME-Tox, DMPK	 Medicinal chemistry  ADME-Tox, DMPK  Structural biology  In vitro & in vivo anti infective platform/ screening  Process development  CMC and Commercial manufacture  Pre-formulation	 Compound management  Hit identification  In vitro & in vivo oncology  Medicinal chemistry  ADME & PK  Cell, protein & antibody production	 Hit identification  In vitro & in vivo biology  Medicinal Chemistry  Biomarker discovery and validation INDiGO®   CMC	 Hit identification  In vitro & in vivo biology  Chemical proteomics & Biomarker discovery and validation  Cell & protein production  Antibody discovery

Cyprotex integration fully on track

Cyprotex – Initial achievements & outlook

Summary of Transaction1)

• Acquisition completed in December 2016
• Post-merger integration ongoing according to plan

Organisation, leadership and systems integration

• Strong leadership team in place
• Relocation of UK operations from Macclesfield to Alderley Park completed in Jan 2017
• Cyprotex continues to operate and serve its client base in all segments under the brand 'Cyprotex – An Evotec company'

New business and further opportunities on horizon

• Very good integration in complete Evotec offering
• Revenues H1 2017: € 12.3 m ahead of initial plans
• Large, strategic contract with major Pharma company signed in Q1 2017
• Approx. € 20 m revenues expected in 2017

Together with Aptuit – World-class in drug discovery and development

Overview of acquisition of Aptuit1)

• Most comprehensive set of integrated early discovery to mid-phase drug development services in biotech and Pharma
• Unique mix of services including integrated drug discovery
• IND enabling studies and support (INDiGO®)
• Drug discovery platform with extended CNS, respiratory expertise
• High-end CMC (Chemistry, Manufacturing & Control)
• Above-industry revenue growth and high RfP2) win rates
• Based in Verona, Italy; Basel, CH and Oxford, UK (next door to Evotec's Oxford facilities)
• About 750 employees working with more than 400 leading biotech and Pharma companies
• Highly accretive to Evotec's revenue growth with strong margins and solid cash generation
• Consideration of \$ 300 m (approx. € 256 m3)) in cash for the acquisition of 100% of Aptuit's share capital
• Financial commitment for the acquisition covered through Evotec's cash and a new € 140 m very attractive debt facility

Integrated offering improves efficiency

Adding world-class drug discovery, INDiGO® and high-end CMC1)

¹⁾ Acquisition of Aptuit announced on 30 July 2017; Closure of transaction expected in Q3 2017 2) API = Active Pharmaceutical Ingredients

A "one-stop-shop" for external innovation

Extension of Evotec's value chain1)

Strong growth outlook

EVT Execute – Expected key milestones 2017

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

New performance-based integrated technology/disease alliance

Expansion of foundations and biotech network in USA/Europe

Milestones from existing alliances

Agenda

Highlights H1 2017

EVT Execute

EVT Innovate

Financial performance and outlook

Strong revenue growth reflects milestones

EVT Innovate – Key performance indicators H1 2017

• Revenue growth of 78% and improved adjusted EBITDA resulting mainly from significant milestone achievements in strategic kidney disease alliance with Bayer and strategic iPSC diabetes alliance with Sanofi
• Slight decrease in R&D expenses due the reallocation of projects and resources to the Celgene collaboration portfolio

¹⁾ Before contingent considerations, income from bargain purchase and excluding impairments on goodwill, other intangible and tangible assets as well as the total nonoperating result

Even more high-value offerings will be possible

Synergies for EVT Innovate following the acquisition of Aptuit1)

• Important milestone achievements
• Strong focus on iPSC platform (e.g. Censo Biotechnologies, Fraunhofer (after period-end))
• BRIDGE model gaining momentum (e.g. two funding rounds in LAB282 projects with Oxford University)
• Unique biobank approach through NURTuRE consortium in kidney diseases
• Grant from IFB Hamburg in immunotherapy/immunooncology

>80 co-owned product opportunities and growing

Partnership portfolio

	Molecule	Therapeutic Area/Indication	Partner	Discovery	Pre-clinical	Phase I	Phase II	Phase III
	EVT3021)	CNS – Alzheimer's disease
	EVT201	CNS – Insomnia
al	EVT1001)	CNS – Depression
c	EVT401	Immunology & Inflammation
ni	ND2)	Oncology
Cli	ND2)	Oncology
	Various	Women's health – Endometriosis						NEW- Clinical start
	ND2)	Immunology & Inflammation
	ND2)	CNS – Pain
	ND2)	Immunology & Inflammation
al	ND2)	Oncology
c ni	EVT770	Metabolic – Diabetes (type 2/1)
cli	ND2)	Respiratory
e-	Various	Women's health – Endometriosis					NEW –	Milestone achievement
Pr	EVT801	Oncology
	EVT701	Oncology
	EVT601	Oncology
	Various ND2)	Nephrology					NEW –	Milestone achievement
	Various ND2)	Immunology & Inflammation
	Various ND2)	Metabolic – Diabetes (type 2/1)
	Various ND2)	Metabolic – Diabetes (type 2/1)
	Various ND2)	Nephrology
y	Various ND2)	Metabolic – Diabetes					NEW –	Milestone achievement
er	Various ND2)	Oncology – Immunotherapy
v o	Various	Immunology & Inflammation – Tissue fibrosis
c	Various	Neurodegeneration
s Di	LpxC inhibitor	Anti-bacterial
	Various	All indications					NEW –	Academic partnerships
	INDY inhibitor	Metabolic
	Various	Internal: Oncology, CNS, Metabolic, Pain & Inflammation	>30 further programmes
	Various	Oncology
	Various	Fibrotic disease	Fibrocor Therapeutics
	Various	Antiviral

PAGE 22 1) EVT302 and EVT100: Partner stopped development; Evotec has regained the licence rights (EVT100 series: Patents have been discontinued in 2016) 2) Not disclosed

First-in-class alliances with significant upside

Key innovation alliances – Selection

Chronic kidney disease ("CKD") Highly innovative therapeutics in diabetic complications (e.g. CKD)

Commercials1)

Undisclosed upfront payment, potential milestones > € 300 m, double-digit royalties

Fibrosis

Novel mechanisms as targeted anti-fibrotics in multi-organ fibrosis

Commercials1)

Undisclosed upfront payment, potential milestones > € 100 m

Immuno-oncology

Development of small molecule based cancer immunotherapies to complement current offerings of checkpoint inhibitors (together with Apeiron Biologics)

Commercials1)

Substantial research payments, potential milestones > € 200 m, double-digit royalties

Endometriosis/Pain World-leading efforts in non-hormonal treatments in endometriosis

Commercials2)

€ 12 m upfront, potential milestones > € 500 m, double-digit royalties

Leading network towards global leadership in iPSC-based and patient-derived drug discovery

Strong focus on further establishing Evotec's iPSC1) platform

Good progress in iPSC alliances

iPSC – Alliances

iPSC alliance in neurodegeneration

Development of novel therapies for a broad range of neurodegenerative diseases based on Evotec's unique patient-derived iPSC platform

Focus on

• ALS Amyotrophic lateral sclerosis
• AD Alzheimer's disease
• HD Huntington's disease
• PD Parkinson's disease….

Commercials

Upfront \$ 45 m, potential milestones > \$ 250 m per project, low double-digit royalties

iPSC alliance in diabetes

Development of beta cell replacement therapy and drug discovery based on functional human beta cells derived from Evotec's unique iPSC platform

iPSC alliance in diabetes

• Important first milestone achievement
• Beta cell replacement therapy
• Drug discovery Small molecules

Commercials

Upfront € 3 m, research payments, potential milestones > € 300 m, double-digit royalties

Access to human samples improves translation

NURTuRE Consortium – Biobanks in Nephropathy

Upside 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 Evotec's platforms, via strategic investments
• Set up new companies with the aim of developing assets to next value inflection points

Upside participation
	(2013)
Panion Ltd.	(2015)
	(2016)
	(2016)
	(2016)
	(2017)
	(2017)

Pre-competitive platform/BRIDGES

(2016): Entitled to equity

(2017): Access to patient data

Strong outlook

EVT Innovate – Expected key milestones 2017

• New clinical initiations and good progress of clinical pipeline within partnerships
• Expansion of academic BRIDGE network

Strong R&D progress within Cure X/Target X initiatives

Strong focus on iPSC (induced pluripotent stem cells) platform

Agenda

Highlights H1 2017

EVT Execute

EVT Innovate

Financial performance and outlook

Revenues up 37%, further improved EBITDA

Key financials H1 2017: Condensed income statement (IFRS)

in € m
	H1 2017	H1 2016	% vs 2016
Revenues	103.4	75.5	37%
Gross margin	35.8%	34.5%	–
 R&D expenses	(8.5)	(9.0)	(5)%
 SG&A expenses	(15.8)	(11.8)	34%
 Impairment of intangible assets	–	(1.4)	–
 Other op. income (expenses), net	5.6	4.6	21%
Operating income	18.2	8.4	117%
Adjusted Group EBITDA1)	26.0	15.8	64%
Net income	10.1	2.7	–

• Revenue increase due to strong performance in base business, Cyprotex and milestone achievements
• Minimal decrease in R&D expenses following reallocation of projects
• Increase in SG&A, increased BD, administrative costs and M&A-related costs
• Other operating income mainly resulting from R&D tax credits in UK/France

³⁰ 1) Before contingent considerations, income from bargain purchase and excluding impairments on goodwill, other intangible and tangible assets as well as the total nonoperating result

Strong results in both segments

Segment information H1 2017

in € m*

	EVT Execute	EVT Innovate	Inter segment elimination	Evotec Group
Revenues	100.4	21.1	(18.1)	103.4
Gross margin	29.4%	46.1%		35.8%
 R&D expenses	(0.3)	(10.4)	2.2	(8.5)
 SG&A expenses	(12.4)	(3.4)	–	(15.8)
 Other op. income (expenses), net	4.4	1.1	–	5.6
Operating income (loss)	21.2	(2.9)	–	18.2
Adjusted EBITDA1)	28.4	(2.4)	–	26.0

• Significantly improved adjusted EBITDA of EVT Execute and EVT Innovate compared to H1 2016
• Strong gross margin in EVT Innovate
• Milestone achievements contributing to both segments

31 1) Before contingent considerations, income from bargain purchase and excluding impairments on goodwill, other intangible and tangible assets as well as the total nonoperating result

* Differences may occur due to rounding

Very strong second quarter 2017

Key financials Q2 2017: Condensed income statement (IFRS)

in € m
	Q2 2017	Q2 2016	 Revenue increase of
Revenues	53.2	38.0	40% compared to Q2 2016 mainly due to
Gross margin	34.3%	35.6%	Cyprotex and milestone achievements
 R&D expenses	(3.9)	(4.6)	 Gross margin in Q2 2017 affected by
 SG&A expenses	(8.5)	(6.4)	amortisation of the Cyprotex customer list
 Other op. income (expenses), net	2.7	3.1	 Increase in SG&A including Cyprotex
Operating income	8.5	5.6	costs, increased BD, administrative costs and
Adjusted Group EBITDA1)	12.8	8.6	M&A-related costs
Net income	3.2	3.9	 Increase in adjusted EBITDA of 49%

³² 1) Before contingent considerations, income from bargain purchase and excluding impairments on goodwill, other intangible and tangible assets as well as the total nonoperating result

Growth trend continues

Revenues & Gross margin overview

• 3-year trend shows strong improvement in revenues and margins
• Group revenue growth due to increase in strong performance in the base business, the Cyprotex contribution as well as milestone achievements
• Increased gross margin mainly reflects higher milestone achievements
• Slight decrease in margin excluding milestones, upfronts and licences due to amortisation of the Cyprotex customer list from 2017

Aptuit will be accretive from day one

Aptuit – Revenues and EBITDA1)

All elements of guidance comfortably confirmed

Guidance 20171) confirmed

1	Double digit top line growth	More than 15% Group revenue growth1) 
2	Profitable and growing	 Adjusted Group EBITDA2) expected to improve significantly compared to 2016
3	Focused investments	 Group R&D expenses of approx. € 20 m

PAGE 35 1) Revenue guidance from 2017 onwards will be based on total Group revenues and no longer on revenues excluding milestones, upfronts and licences. Due to an increasing number of milestonebearing projects and factoring in a probability of success, total milestone-based revenues become more predictable and contribute more and more to the Company's total revenue and profitability.

2) Before contingent considerations, income from bargain purchase and excluding impairments on goodwill, other intangible and tangible assets as well as the total non-operating result