Evotec SE — Interim / Quarterly Report 2018

Aug 9, 2018

Evotec = External Innovation Strong H1 2018

Evotec AG, H1 2018 Interim Report, 09 August 2018

Forward-looking statement

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 2017 and 2018 results are not fully comparable. The difference stems from the acquisition of Aptuit, effective 11 August 2017. The results from Aptuit are only included from 11 August 2017 onwards. The accounting policies used to prepare this interim information are the same as those used to prepare the audited consolidated financial statements for the year ended 31 December 2017, except for the adoption of new standards effective as of 01 January 2018.

From 01 January 2018 onwards, Evotec applies IFRS 15. The comparison period 2017 is adjusted from the first time application of IFRS 15.

Welcome to H1

Your Management Team

Agenda

Highlights H1

EVT Execute

EVT Innovate

Financial performance and outlook

Strong business performance across all areas

First six months 2018 – State of play

EVT Execute

• Very good performance by all service lines
• High-quality drug development business performing well
• INDiGO solutions receiving increasing market traction
• Outstanding portfolio of new and extended integrated drug discovery and development projects signed

EVT Innovate

• New Phase I and Phase II clinical initiations
• Strategic pipeline-building and open innovation effort in infectious diseases initiated
• Significant new oncology partnership with Celgene
• High-value milestone achievements in iPSC alliances and continued focus on iPSC platform
• BRIDGE model rolling-out

Corporate

• Action Plan 2022 "Leading External Innovation" fully implemented
• Aptuit integration according to plan – 50% of acquisition loan repaid within the first year, mainly through strong operating cash inflow
• Conversion into European Company (SE) initiated

Fully on track for growth and profits with even higher R&D expenses

Financials H1 2018 & FY 2018 Guidance

Strong financial performance

• Group revenues up 67% to € 173.8 m (H1 2017: € 104.3 m)
• EVT Execute revenues up 61% to € 163.3 m
• EVT Innovate revenues up 52% to € 32.0 m
• Adjusted EBITDA1) up 47% to € 38.6 m (H1 2017: € 26.2 m)
• Adj. EBITDA of € 36.3 m for EVT Execute
• Adj. EBITDA for € 2.3 m for EVT Innovate
• R&D expenses of € 10.0 m
• Strong liquidity of € 109.8 m including partial repayment of acquisition loan

Guidance 2018

• More than 30% Group revenue growth (2017: € 257.3 m2) )
• Adjusted Group EBITDA1) to improve by approx. 30% compared to 2017 (2017: € 58.4 m2) )
• R&D expenses of € 35-45 m3) (previously: € 20-30 m) (2017: € 17.6 m)

¹⁾ 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

²⁾ 2017 figures adjusted from the first time application of IFRS 15

³⁾ The additional R&D efforts are not expected to impact the adjusted EBITDA since these extra infectious diseases-related R&D expenses will be covered by other operating income recognised in context of the new agreement with Sanofi.

Strong performance in both segments

Unique business model – EVT Execute & EVT Innovate

2,400 x expertise & excellence coming together

Global footprint – Evotec's centres of excellence

Hamburg (HQ), Göttingen, Munich (Germany)	Abingdon, Alderley Park (UK)	Toulouse + Lyon (France)	Verona (Italy), Basel (CH)	Princeton, Watertown, Branford (USA)
~520 employees  Hit identification  In vitro & in vivo biology  Chemical proteomics and biomarker discovery and validation  Cell & protein production	~650 employees  Medicinal chemistry  ADME-Tox, DMPK  Structural biology  In vitro & in vivo anti infective platform  Process development	~370 + ~ 100 employees  Compound management  Hit identification  In vitro & in vivo oncology  Medicinal chemistry  ADME & PK	~610 employees  Hit identification  In vitro & in vivo biology  Medicinal Chemistry  ADME-Tox, DMPK  Biomarker discovery and validation	~110 employees  Compound ID, selection and acquisition  Compound QC, storage and distribution  Cell & protein production  ADME-Tox, DMPK
 Antibody discovery	 CMC and Commercial manufacture  Pre-formulation	 Cell, protein & antibody production  Anti-infective platform	 INDiGO  CMC  In vitro & in vivo anti infective platform

Leading megatrend in accessing external innovation

"Action Plan 2022 – Leading External Innovation"

Action Plan 2022 fully implemented

"Action Plan 2022 – Leading External Innovation"

AP 2022 delivers market-leading external drug discovery and development solutions based on state-of-the-art technologies and processes

AP 2022 relies on most efficient R&D delivery within a unique business model

AP 2022 continues to build a broad co-owned pipeline together with prime partners

Agenda

Highlights H1

EVT Execute

EVT Innovate

Financial performance and outlook

Continued EVT Execute growth in all service lines

EVT Execute – Key performance indicators H1 2018

• Excellent performance of EVT Execute revenues due to growth in the base business and six months Aptuit contribution (€ 53.6 m)
• Significant increase in adjusted EBITDA mainly due to strong revenue growth
• EBITDA margin >20% despite different business mix with Aptuit

3) 2017 figures adjusted from the first time application of IFRS 15

¹⁾ Before contingent considerations, income from bargain purchase & excl. impairments on goodwill, other intangible & tangible assets as well as the total non-operating result 2) Not adjusted according to IFRS 15

Aptuit integration on track, cross-selling gaining momentum

Evotec's integrated offering and core competences along the value chain

Evotec offers end-to-end platform solutions including and high-end CMC manufacturing

Balanced customer mix

EVT Execute – Selected KPIs H1 2018

Operational excellence attracts new projects

EVT Execute – Major achievements H1 2018

• Strong progress in existing alliances (e.g. Forge, Dermira, C4X, Blackthorn, Abivax)
• New integrated drug discovery agreements (e.g. Katexco)
• INDiGO cross-selling with new alliances (e.g. Carna Biosciences, Petra Pharma)
• ADME-Tox testing with strong performance (Cyprotex, an Evotec company)

Strong outlook for H2 2018

EVT Execute – Expected key milestones 2018

• New long-term alliances integrating the offering of Aptuit, strategic launch of INDiGO
• • New performance-based integrated technology/disease alliances

Expansion of foundations and biotech network in USA/Europe

Milestones from existing alliances

Agenda

Highlights H1

EVT Execute

EVT Innovate

Financial performance and outlook

Milestones and strong base business drive EVT Innovate

EVT Innovate – Key performance indicators H1 2018

• Revenues and adjusted EBITDA in H1 2018 driven by high milestone achievements in key alliances and solid base revenue growth
• R&D expenses focus on CNS, metabolic diseases as well as academic BRIDGEs
• From H2 2018 onwards, significant additional R&D investments in infectious diseases will start

¹⁾ Before contingent considerations, income from bargain purchase & excl. impairments on goodwill, other intangible & tangible assets as well as the total non-operating result 2) Not adjusted according to IFRS 15

Very good development progress, ID expansion brings co-owned portfolio to approx. 100 projects

Partnership portfolio

	Molecule	Therapeutic Area/Indication	Partner	Discovery	Pre-clinical	Phase I	Phase II
	EVT201	CNS – Insomnia
	BAY-1817080	Chronic cough					Phase II start
	EVT401	Immunology & Inflammation
	ND1)	Oncology
al c	ND1)	Oncology
ni	Various	Women's health – Endometriosis					Phase I start
	Various	Women's health – Endometriosis
Cli	Various	Women's health – Endometriosis
	ND1)	Immunology & Inflammation
	Various	Oncology
	ND1)	Respiratory
	ND1)	CNS – Pain
	ND1)	Immunology & Inflammation
	ND1)	Oncology
al c	ND1)	Respiratory
ni	Various	Women's health – Endometriosis
cli	EVT801	Oncology
	EVT701	Oncology
e-	EVT601	Oncology
Pr	Various ND1)	Oncology – Immunotherapy
	Various	Anti-infectives	>5 programmes				NEW – From ID collaboration
	Various	CNS, Metabolic, Pain & Inflammation	>10 further programmes
	Various ND1)	Nephrology
	Various ND1)	Immunology & Inflammation
	Various ND1)	Metabolic – Diabetes (type 2/1)
	Various ND1)	Metabolic – Diabetes (type 2/1)
	Various ND1)	Nephrology
y	Various ND1)	Metabolic – Diabetes					NEW milestone achievement
er	Various	Oncology					NEW partnership
v	Various	Immunology & Inflammation – Tissue fibrosis
o c s	Various	Neurodegeneration					NEW milestone achievement
	LpxC inhibitor	Anti-bacterial
Di	Various	All indications
	INDY inhibitor	Metabolic
	Various	Fibrotic disease	Fibrocor Therapeutics
	Various	Antiviral
	Various	Anti-infectives	>10 programmes				NEW – From ID collaboration
	Various	Internal: Oncology, CNS, Metabolic, Pain & Inflammation	>30 further programmes

1) Not disclosed Note: Several projects have fallen back to Evotec, where Evotec does not intend to run further clinical trials unpartnered, e.g. EVT302, EVT101, …

ID portfolio will be focused on best opportunities

Infectious disease partnership with Sanofi & open innovation in ID

Target validation	Lead identification	Lead optimisation	IND enabling
Early research: • Immune Prophylaxis • Rhinovirus C	Gram(-) Growth Inhibitor
• Hand Foot and Mouth Disease • Influenza	Gram (-) Influx Staph Persisters Inhibition
• RSV • HBx inhibitors	Gram (-) Undisclosed HBCytokine Modulation
	HBV Destabilizer
	Malaria multi-stage Inhibitors	Gram (-) Undisclosed	Malaria
	Tuberculosis (TB)	TB Growth inhibition	ChikV mAb
Severe Bacterial infections	Viral infections	Diseases of the Developing World

Accelerated push forward across strategic ventures

EVT Innovate – Key priorities 2018

• Significant progress in existing iPSC alliances (e.g. with Sanofi (diabetes) and Celgene (neurodegeneration))
• New long-term oncology partnership with Celgene
• Participation in additional financing rounds of Topas Therapeutics and Forge
• BRIDGE model roll-out ongoing (New LAB591 initiated; projects selected in LAB150 and LAB282)

Excellent momentum in iPSC-based pipeline

iPSC – Alliances; Progress overview

iPSC alliance in neurodegeneration	iPSC alliance in diabetes
Development of novel therapies for a broad	Development of beta cell replacement therapy and
range of neurodegenerative diseases	drug discovery based on functional human beta cells
Focus on  ALS Amyotrophic lateral sclerosis  AD Alzheimer's disease  HD Huntington's disease  PD Parkinson's disease …	Focus on  Beta cell replacement therapy  Drug discovery – Small molecules
Commercials	Commercials
Upfront \$ 45 m, potential milestones	Upfront € 3 m, research payments, potential
> \$ 250 m per project, low double-digit royalties	milestones > € 300 m, double-digit royalties

Global leadership in iPSC

Strong focus on iPSC1) platform

New alliance in oncology with Celgene

Celgene & Evotec – Expansion of relationship into oncology

Oncology partnership with Celgene

• Long-term strategic drug discovery and development partnership to identify new therapeutics in oncology
• Initial focus on solid tumours, leveraging an industryleading phenotypic screening platform with unique compound libraries and associated target deconvolution capabilities
• Activities to be mainly executed at Munich/Göttingen (Germany) and Toulouse (France) sites
• Commercials: \$ 65 m upfront payment from Celgene to Evotec, Evotec eligible to receive significant milestone payments as well as tiered royalties on each licensed programme
• Celgene holds exclusive opt-in rights to license worldwide rights to all programmes developed within this collaboration

BRIDGE roll-out is just starting

LAB282, LAB150 and LAB591 – Progress YTD 2018

Many things achieved already, and more to come

EVT Innovate – Expected key milestones 2018

• New clinical initiations and good progress of clinical pipeline within existing partnerships
• Expansion of academic BRIDGE network
• Strong R&D progress within Cure X/Target X platforms and new EVT Innovate partnerships
• Continued expansion of iPSC (induced pluripotent stem cells) platform

Agenda

Highlights H1

EVT Execute

EVT Innovate

Financial performance and outlook

Strong financial performance with new business mix

Condensed income statement H1 2018 – Evotec AG and subsidiaries

in € m1)

	H1 2018	H1 20174)	% vs. 2017
Revenues	173.8	104.3	67%
Gross margin2)	28.9%	35.7%	–
 R&D expenses	(10.0)	(8.5)	17%
 SG&A expenses	(27.1)	(15.8)	72%
 Impairment of intangible assets	(4.2)	–	–
 Other op. income (expenses), net	12.7	5.6	–
Operating income	21.7	18.4	18%
Adjusted Group EBITDA3)	38.6	26.2	47%
Net income	17.9	10.3	73%

• New business mix and amortisation following acquisitions resulting in new gross margin setup
• Revenue growth due to strong performance in base business, Aptuit contribution (€ 53.6 m), and milestones
• Planned increase in SG&A expenses due to addition of Aptuit and strong Company growth
• Other operating income increased due to higher R&D tax credits and release of earn-out accruals following the impairment of EVT770

¹⁾ Differences may occur due to rounding

²⁾ Gross margin in 2018 considers amortisation of acquisitions from Aptuit and Cyprotex. Gross margin in 2017 only considers amortisation from Cyprotex acquisition. 3) Before contingent considerations, income from bargain purchase and excl. impairments on goodwill, other intangible & tangible assets as well as the total non-operating result 4) 2017 figures adjusted from the first time application of IFRS 15

Increased momentum in both segments

Segment information H1 2018 – Evotec AG and subsidiaries

in € m1)
	EVT Execute	EVT Innovate	Inter segment elimination	Evotec Group
Revenues	163.3	32.0	(21.5)	173.8
Gross margin	22.4%	50.4%		28.9%
 R&D expenses	(0.4)	(12.0)	2.4	(10.0)
 SG&A expenses	(23.3)	(3.8)	–	(27.1)
 Impairment of intangible assets	–	(4.2)	–	(4.2)
 Other op. income (expenses), net	9.1	3.6	–	12.7
Operating income	21.9	(0.2)	–	21.7
Adjusted EBITDA2)	36.3	2.3		38.6

• New business mix with different margin since Aptuit acquisition
• Growth in EVT Execute driven by base business and contribution from Aptuit acquisition
• Gross margin in EVT Execute strong despite amortisation of intangible assets and adverse FX
• EVT Innovate boosted by milestones and positive base revenue growth
• Significantly higher R&D tax credits

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

²⁸ 1) Differences may occur due to rounding

Very strong second quarter

Condensed income statement Q2 2018 – Evotec AG and subsidiaries

Q2 2018	Q2 20172)
94.8	53.4
33.6%	34.1%
(5.4)	(3.9)
(13.8)	(8.5)
(4.2)	–
6.7	2.7
15.2	8.5
24.6	12.8
14.3	3.2

• Revenue increase of 77%
• Increase in adjusted EBITDA of 93%
• SG&A on similar level as in prior quarters following Aptuit acquisition
• Impairment of intangible assets for EVT770 and Panion
• Significantly higher R&D tax credits affecting other operating income

²⁹ 1) Before contingent considerations, income from bargain purchase and excl. impairments on goodwill, other intangible & tangible assets as well as the total non-operating result 2) 2017 figures adjusted from the first time application of IFRS 15

Growth trend continues with new margin setup

Revenues & Gross margin overview

¹⁾ Gross margin in the future may be volatile due to the dependency of receipt of potential milestone or out-licensing payments. In addition, the amortisation of the purchase price allocation (PPA) of the recent strategic acquisitions impacts costs of revenue and thus the gross margin. 2) 2017 figures adjusted from the first time application of IFRS 15

Guidance confirmed, R&D guidance updated following ID initiative1)

Guidance 2018

1	Double digit top line growth	 More than 30% Group revenue growth
2	Profitable and growing	Adjusted Group EBITDA2)  expected to improve by approx. 30%
3	Focused investments	Group R&D expenses of € 35-45 m1)  (previously: € 20-30 m)

1) The additional R&D efforts are not expected to impact the adjusted EBITDA since these extra infectious diseases-related R&D expenses will be covered by other operating income recognised in context of the new agreement with Sanofi.

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

Important next dates

Financial calendar 2018

Annual Report 2017	28 March 2018
Quarterly Statement Q1 2018	09 May 2018
Annual General Meeting 2018	20 June 2018
Half-year 2018 Interim Report	09 August 2018
Quarterly Statement 9M 2018	13 November 2018