Evotec SE — Interim / Quarterly Report 2019

Nov 12, 2019

Evotec SE, Quarterly Statement 9M 2019, 12 November 2019

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 2018 and 2019 results are not fully comparable. The difference stems from the acquisition of Evotec ID (Lyon) SAS, effective 01 July 2018. The results from Evotec ID (Lyon) SAS are only included from 01 July 2018 onwards. Furthermore, Just - Evotec Biologics (former Just Biotherapeutics) was acquired effective 02 July 2019. The results from Just - Evotec Biologics are included from 02 July 2019 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 2018, except for the adoption of IFRS 16 which is applied at Evotec as of 01 January 2019.

Welcome

The Management Team

Agenda

Highlights & strategy

Financial performance

Scientific and operational performance

Guidance & next steps

Strong positive momentum across all business lines

Recent highlights

• New strategic drug discovery and development alliances
• Successful progress in co-owned pipeline
• Multiple important milestones achieved
• Just Evotec Biologics picking up speed
• Extension into 2023 of iPSC alliance with Celgene triggers \$ 30 m payment
• Foundation of 50:50 Joint venture with Vifor Pharma (after period-end)
• New precision medicine initiatives in Woman´s Health and Oncology
• Expansion of BRIDGEs and equity based co-ownership engagements
• Expanding leading position in infectious diseases via multiple alliances

Strong performance – increase in EBITDA guidance

Financials 9M 2019 & FY 2019 Guidance

Strong financial performance

• Increase of revenues by 16% to € 321.4 m (9M 2018: € 278.1 m1))
• Adjusted EBITDA2) up by 36% to € 93.2 m (9M 2018: € 68.7 m)
• Unpartnered R&D expenses of € 25.7 m (9M 2018: € 16.0 m)
• Strong liquidity position of € 282.6 m (31 December 2018: € 149.5 m)

Revenue guidance 2019 confirmed; EBITDA guidance increased

• Approx. 15% revenue growth (2018: € 364.0 m3)) 4)
• Approx. 15% (previously: >10%) adjusted EBITDA2) growth (2018: € 92.0 m5))
• Unpartnered R&D € 30-40 m (2018: € 22.9 m)

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1) 2018 data including reclasses of recharges according to IFRS 15 (€ 8.1 m) 5 3) 2018 total revenues excl. revenues from recharges according to IFRS 15

• 2) Before contingent considerations, income from bargain purchase & excluding impairments on goodwill, other intangible & tangible assets as well as the total non-operating result
• 4) Based on current/updated FX rates

5) 2018 total adjusted Group EBITDA excl. € 3.5 m one-off effects in 2018

"… just the beginning"

"Action Plan 2022 – Leading External Innovation"

Co-owned pipeline gains momentum and visibility

Unique business model

ONE platform open for tailor made business formats

EVT Execute & EVT Innovate

Agenda

Highlights & strategy

Financial performance

Scientific and operational performance

Guidance & next steps

Strong growth translates into strong profitability

Condensed income statement 9M 2019 – Evotec Group

in € m1)

	YTD 2019	YTD 20183)	% vs. 2018
Revenues from contracts with customers	321.4	278.1	16%
Gross margin	30.7%	30.1%	–
 R&D expenses	(41.3)	(20.9)	97%
 SG&A expenses	(46.2)	(40.8)	13%
 Impairment of intangible assets and goodwill	(11.9)	(4.2)	183%
 Income from bargain purchase	–	15.4	–
 Other op. income (expenses), net	47.1	26.3	79%
Operating income	46.4	59.5	(22%)
Adjusted Group EBITDA2) 5)	93.2	68.7	36%
Net income4)	29.7	52.3

• Strong base business and Just Evotec Biologics lead to significant revenue growth
• Unpartnered R&D expenses increase to € 25.7m (2018: € 16.0 m)
• One-off impairment due to termination of SGM-1019
• Improved other operating income due to recharges for Evotec ID (Lyon) and growing R&D tax credits
• Operating income 2018 positively impacted by one-off-effect from bargain purchase
• Adjusted Group EBITDA positively affected by IFRS 16 (€ 10.1 m) and impact from Just – Evotec Biologics
• Net Income is not comparable because of one-off effects

¹⁾ Differences may occur due to rounding

²⁾ Before contingent considerations, income from bargain purchase and excl. impairments on goodwill, other intangible and tangible assets as well as the total non-operating result 3) 2018 data including reclasses of recharges according to IFRS 15

⁴⁾ Not directly comparable because of one off effects in 2018

⁵⁾ 2018 is not restated for IFRS 16

Growth trend comes with increased gross margin

Revenues & Gross margin overview 9M 2019

• Despite slightly lower contribution from milestones, upfronts and licenses in first 9M 2019, strong overall revenue growth and gross margin increase
• IFRS 15 contributes € 10.6 m to the revenue line (2018: € 8.1 m)
• Increase in base margin based on good capacity utilisation and favourable FX while PPA amortisation and IFRS 15 are burdensome to the GM

1) Gross margin in the future may be volatile due to the dependency of receipt of potential milestone or out-licensing payments, both having a strong impact on the gross margin, also new business through Aptuit.

2) 2018 data including reclasses of recharges according to IFRS 15

Very good Q3 shows strong utilization of platform

Condensed income statement Q3 2019 – Evotec Group

in € m1)

	Q3 2019	Q3 2018	% vs. 2018
Revenues from contracts with customers	114.3	99.2	15%
Gross margin	30.6%	33.7%	–
 R&D expenses	(12.0)	(10.9)	10%
 SG&A expenses	(16.3)	(13.6)	20%
 Income from bargain purchase	–	15.4	–
 Other op. income (expenses), net	15.7	13.6	15%
Operating income	22.4	37.8	(41%)
Adjusted Group EBITDA3)	35.0	30.1	16%
Net income4)	19.0	34.4	(45%)

• Q3 revenue growth driven by strong base business and contribution from Just – Evotec Biologics (€ 10.4 m)
• Q3 2018 included higher milestone, upfront and license revenues
• SG&A increase reflects organic growth and expenses from acquired companies and transactions
• Net income is not directly comparable to 2018. Net income decreased due to higher deferred tax expenses in Q3 2019 and positive effect in Q3 2018 from bargain purchase of the acquisition of Evotec ID (Lyon)

¹⁾ Differences may occur due to rounding

²⁾ 2018 data including reclasses of recharges according to IFRS 15

³⁾ Before contingent considerations, income from bargain purchase and excl. impairments on goodwill, other intangible and tangible assets as well as the total non-operating result. 4) Not directly comparable because of one off effects in 2018

Both business segments fully on strategy

Segment information 9M 2019 – Evotec Group

in € m1)

	EVT Execute	EVT Innovate	Inter segment elimination	Not allocated (IFRS 15)3)	Evotec Group
Revenues	308.1	61.8	(59.1)	10.6	321.4
Gross margin	28.3%	29.7%	–	–	30.7%
 R&D expenses	(0.8)	(47.1)	6.6	–	(41.3)
 SG&A expenses	(35.9)	(10.3)	–	–	(46.2)
 Impairment of intangible assets and goodwill	–	(11.9)	–	–	(11.9)
 Income from bargain purchase	–	–	–	–	–
 Other op. income (expenses), net	14.6	32.5	–	–	47.1
Operating result	64.9	(18.5)	–	–	46.4
Adjusted EBITDA2)	97.4	(4.2)	–	–	93.2

• Growth of 21% in EVT Execute due to strong base business and contributions from Just – Evotec Biologics
• Revenue growth of 21% in EVT Innovate driven by strong underlying performance, milestones and new partnerships
• Increased R&D expenses in EVT Innovate both in unpartnered and partnered R&D according to strategy
• EVT Execute operating result increased due to efficiency, high utilisation and careful cost management

1) Differences may occur due to rounding

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

³⁾ Not allocated to segments: Material charges according IFRS15

Agenda

Highlights & strategy

Financial performance

Scientific and operational performance

Guidance & next steps

Strong progress for our partners

EVT Execute – Major achievements 9M 2019

• Strong demand and performance on all business lines with strong increased demand from all customer groups
• New strategic multi-year drug discovery collaboration across multiple therapeutic areas with Takeda
• Milestone achievements (Bayer, Boehringer Ingelheim, Aeovian)
• Outlicensing of bio-similar project to Biocon Biologics from Just – Evotec Biologics
• Authorisation by AIFA1) to produce commercial drug products and orphan drugs – complements Evotec's fully integrated CMC offering

Well-balanced global customer mix

EVT Execute – Selected KPIs 9M 2019

Revenues by customer segment ytd1) (in %)		Customer type ytd1) (in %)		Revenues by region ytd1) (in %)
		100%	Mid-sized Pharma	19%	100%	RoW	100% 7%
Remaining	42%		Foundation/ NFP/	7%		USA	40%
		Academic
Top 11-30 customers	20%		Biotech	45%
Top 10 long-term strategic alliances	38%		Top 20 Pharma	29%		Europe	53%
	9M 2019			9M 2019			9M 2019

"just the beginning …" for dramatically improved access and processes in biologics

Just – Evotec Biologics – Value Proposition

Molecule and process optimization ensure predictable performance and manufacturability with significant time and cost savings. Our modular production system enables

maximum flexibility in terms of capacity and location.

James Thomas, PhD, Just – Evotec Biologics

Multimodality offering and partnering is reality

Initial achievements & outlook of Just – Evotec Biologics

• Integration of processes, services, and team into Evotec Group on track
• Teva alliance for design and development of high-productivity biomanufacturing
• Out-licensing of pre-clinical biosimilar asset with Biocon Biologics
• Strong initial revenue contribution of € 10.4 m in Q3
• New business "cross-selling" opportunities on horizon
• Webinar to share more detailed information on unique technological position and technological and capacity outlook planned before end 2019

Co-ownership for massive pipeline opportunities

EVT Innovate – Major achievements 9M 2019

• Very good pipeline progress
• Extension of iPSC partnership with Celgene
• Multiple new co-ownership agreements
• Collaboration with Celmatix in woman's health
• JV with Vifor in nephrology (after period-end)
• Building of leading position in Infectious Diseases via alliances (GARDP1) , GNA Now, Helmholtz and Bill & Melinda Gates Foundation)

Fully invested pipeline is gaining visibility

Partnership portfolio pre-clinical and clinical

	Molecule	Therapeutic Area/Indication	Partner	Discovery	Pre-clinical	Phase I	Phase II	Phase III
	EVT201	CNS – Insomnia
	BAY-1817080	Chronic cough
	ND1)	Chronic cough
	CT7001	Oncology
	CT7001	Oncology
Clinical	EVT401	Immunology & Inflammation
	Various	Women's health – Endometriosis
	Various	Women's health – Endometriosis
	Various	Endometriosis Women's health –
	Various	Respiratory
	ND1)	Oncology
	ND1)	Immunology & Inflammation
	ND1)	Pain
	Various	Women's health – Endometriosis
Pre-clinical	EVT801	Oncology
	TargetImmuniT	Oncology – Immunotherapy
	ND1)	Oncology (+ several discovery programmes)
	ND1)	Fibrosis
	Various	CNS, Metabolic, Pain & Inflammation	>10 further programmes

1) Not disclosed

>100 discovery projects are progressing rapidly

Partnership research and discovery portfolio

	Molecule	Therapeutic Area/Indication	Partner	Discovery	Pre-clinical	Phase I	Phase II	Phase III
	Various ND1)	Nephrology
	Various ND1)	Immunology & Inflammation
	Various ND1)	Nephrology
	Various ND1)	Metabolic – Diabetes
	Various	Oncology
	Various	Immunology & Inflammation – Tissue fibrosis
	Various	Neurodegeneration						Extension
	ND1)	Oncology – DNA damage response						NEW spin-off
	ND1)	Anti-bacterial
	Various	All indications						NEW BRIDGEs
	ND1)	Dermatological diseases
	ND1)	Facioscapulohumeral Dystrophy
Discovery	INDY inhibitor	Metabolic
	Various	Fibrotic disease	Fibrocor Therap./ Galapagos
	TargetPicV	Antiviral
	ND1)	PCOS						NEW Partnership
	ND1)	Nephrology						NEW Joint Venture
	ND1)	Oncology
	ND1)	Novel antibiotics
	ND1)	Novel antibiotics
	ND1)	Oncology – Colorectal cancer						Milestone achieved
	ND1)	Inflammatory						NEW Equity
	ND1)	Cancer	Immunitas					NEW Equity and Milestone achieved
	Various	Internal: Oncology, CNS, Metabolic, Pain & Inflammation	>40 further programmes
	Various	Anti-infectives	>5 programmes

Precision medicine in kidney disease

Evotec and Vifor Joint Venture

• Chronic kidney disease (CKD) means your kidneys are damaged and losing ability to keep you healthy – CKD is the 9th leading cause of death in the United States
• Main causes of CKD are diabetes and high blood pressure

• Renal dialysis market size is > \$ 20 bn

• owned clinical assets

• € 25 m initial financing from Vifor into the 50:50 Joint Venture

Precision medicine in Women's Health

Evotec and Celmatix in e.g. PCOS

First milestone achieved in less than 3 months

Evotec and Indivumed – precision medicine in colorectal cancer (CRC)

Colorectal Cancer (CRC)

• Third most common cancer type
• Following lung and breast cancer; 2 nd leading cause of cancer death
• Market size of > \$ 10 bn

Extension into 2023 triggers \$ 30 m payment

iPSC CNS alliance with Celgene

BRIDGE concept continues rollout

LAB282, LAB150, LAB591, LAB031, LAB10x, LAB555, …

Co-owned pipeline of equity holdings is emerging

Equity participations – Overview

Equity participation Artificial Intelligence for automat-ed drug design	Equity participation Facioscapulo humeral muscular dystrophy	Equity participation Metabolic disorders	Equity participation Fibrosis partnership with TIAP	Equity participation Targeting metalloenzymes	Equity participation Innovative molecular pathways in oncology
Initiated 2018	Initiated 2017	Initiated 2016	Initiated 2017	Initiated 2016	Initiated 2016
					Immunitas
Spin-off Nanoparticle-based therapeutics	Consortium membership Kidney diseases	Joint Venture Kidney diseases	Spin-off Equity participation DNA damage Inflammatory disease response		Equity participation Oncology/Biologics
Initiated 2016	Initiated 2017	Initiated 2019	Initiated 2019	Initiated 2019	Initiated 2019

Agenda

Highlights & strategy

Financial performance

Scientific and operational performance

Guidance & next steps

Very positive outlook for full-year 2019

Updated Guidance 2019

1	Double digit top line growth	 Approx. 15% growth in Group revenues from contracts with customers without revenues from recharges1)
2	Profitable and growing	 Adjusted Group EBITDA2) expected to improve by approx.15% compared to € 92.0 m in 20183) (previously: >10%)
3	Focused unpartnered investments	 Unpartnered Group R&D expenses of € 30-40 m4)

¹⁾ 2018 total revenues excluding revenues from recharges according to IFRS 15: € 364.0 m / Based on current/updated FX rates

²⁾ Before contingent considerations, income from bargain purchase & excl. impairments on goodwill, other intangible & tangible assets as well as the total non-operating result 3) 2018 total adjusted Group EBITDA excluding € 3.5 m one-off effects in 2018: € 92.0 m

⁴⁾ For better comparison to previous years, Evotec focuses its guidance and upcoming reporting during the course of 2019 on the "unpartnered R&D" part. ID-related R&D expenses will be fully reimbursed by its partner Sanofi ("partnered R&D").

Stay tuned

Financial calendar 2020

Annual Report 2019	26 March 2020
Quarterly Statement Q1 2020	14 May 2020
Annual General Meeting 2020	16 June 2020
Half-year 2020 Interim Report	12 August 2020
Quarterly Statement 9M 2020	12 November 2020

Your contact:

Dr Werner Lanthaler Chief Executive Officer

+49.(0).40.560 81-242 +49.(0).40.560 81-333 Fax werner.lanthaler@evotec.com