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Evotec SE — Investor Presentation 2013
Jun 5, 2013
151_rns_2013-06-05_7971e6b4-7043-4ec9-9ec5-869499c4d186.pdf
Investor Presentation
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Evotec AG
^< Recommendation: BUY(BUY)
Risk: Medium (Medium) Price Target: EUR 3.90 (3.90)
1Q/13 results
- In 1Q/13 revenues amounted to EUR 17.1m (PY: EUR 20.1m; yoy -15.1%). The decline is mostly attributable to the lack of milestones (in 1Q/12 top line included EUR 3.9m milestone payment) and slow start at the beginning of the year. Operating loss in 1Q/13 amounted to EUR 2.7m (PY: EUR 1.3m). The decline in terms of top line and operating result is not surprising, as we mentioned in our last update that we expect to see milestone and upfront payments in 2H/13. Cash from operating activities was positive at EUR 0.1m (PY: EUR -4.7m). Liquidity amounted to EUR 60.4 m at the end of March 2013 (31 December 2012: EUR 64.2m).
- Evotec confirmed its 2013 guidance. Revenues are anticipated in the range of EUR 90-100m and operating result is expected to improve in 2013 compared to 2012. According to management, top line and profitability in 2H/13 will be driven by milestones. Furthermore the confidence is backed by a well filled order book, which should drive the revenue growth without milestones in the subsequent quarters. The operational start of new compound management facility in 2H/13 should also contribute to revenues.
- While in 1H/13 there were no milestone events, the newsflow continued to be quite intensive, which, in our view, provides the basis for a significant long term potential. Particularly significant advance with CureBeta program (discovery of the new hormone betatrophin that controls beta cell proliferation) is worth mentioning. While the program is still in a very early stage of development, the findings validate the strategy framework to incorporate academia into Evotec's business model. In 1H/13, the company entered further collaborations with: 1) Yale University and 2) Dana-Farber's Belfer Institute for Applied Cancer Science.
- The newsflow should continue to be significant in the near future. For 2013, the company expects: 1) Start at least three clinical trials within existing alliances within 18 months; 2) Commercialization of one Cure initiative; 3) Initiate 3-5 more Cure X/ Target X programmes; 4) Further long term deals with big/mid-size Pharma and Biotech; 5) At least one new integrated technology disease alliance;
We leave our PT at EUR 3.90 unchanged and confirm our BUY recommendation.
| Y/E 31.12., EUR m | 2009 | 2010 | 2011 | 2012 | 2013E | 2014E | 2015E |
|---|---|---|---|---|---|---|---|
| Revenues | 42.7 | 55.3 | 80.1 | 87.3 | 98.6 | 111.4 | 126.4 |
| Gross profit | 18.4 | 24.3 | 35.0 | 31.0 | 40.4 | 53.5 | 58.2 |
| EBITDA | -38.2 | 6.5 | 11.4 | 5.6 | 16.9 | 22.5 | 22.9 |
| EBIT | -42.3 | 1.7 | 5.2 | -3.2 | 8.5 | 13.8 | 14.1 |
| Net income/loss | -45.5 | 3.0 | 6.7 | 2.5 | 7.2 | 11.7 | 12.2 |
| EPS | -0.43 | 0.03 | 0.06 | 0.02 | 0.06 | 0.10 | 0.10 |
| CPS | -0.20 | 0.00 | 0.07 | 0.07 | 0.16 | 0.14 | 0.00 |
| Gross margin | 43.2% | 44.1% | 43.7% | 35.6% | 41.0% | 48.0% | 46.0% |
| EBITDA margin | -89.6% | 11.7% | 14.2% | 6.4% | 17.2% | 20.2% | 18.1% |
| EBIT margin | -99.1% | 3.1% | 6.5% | -3.7% | 8.6% | 12.4% | 11.2% |
| EV/Sales | 6.4 | 4.9 | 3.4 | 3.1 | 2.8 | 2.4 | 2.2 |
Source: Evotec AG; CBS Research AG
05 June 2013
Please notice the information on the preparation of this document, the disclaimer, the advice regarding possible conflicts of interests, and the mandatory information required by § 34b WpHG (Securities Trading Law) at the end of this document. This financial analysis in accordance with § 34b WpHG is exclusively intended for distribution to individuals that buy or sell financial instruments at their own account or at the account of others in connection with their trading activities, occupation, or employment.
Newsflow in 2Q/13
While 1H/13 lacked milestone events, the newsflow continued to be quite intensive, which, in our view, provides the basis for a significant long term potential. In 2Q/13 the following events have occurred:
1) Extended partnership with Genentech (Roche) for three additional years;
2) A significant advance was achieved within CureBeta collaboration. Prof. Doug Melton and his post doc Peng Yi published their findings regarding discovery of the new hormone betatrophin that controls beta cell proliferation. All intellectual property associated with these findings have been licensed to Evotec and subsequently sublicensed to Janssen within the CureBeta collaboration.
While the program is still in a very early stage of development, the findings validates the strategy to build the academic party into Evotec's business model.
3) Expanded compound management capability into East Coast of US. The facility will be fully operational in early Q3/13 and will complement the existing facility in South San Francisco.
4) Research agreement in oncology with Dana-Farber's Belfer Institute for Applied Cancer Science. Collaboration aimed at discovering and commercialising novel cancer treatments based on epigenetic drug mechanisms. Evotec, Dana-Farber and Dana-Farber's Belfer Institute for Applied Cancer Science will invest in enabling technologies, experimental target validation and the generation of chemical matter by leveraging existing expertise and platforms.
Further details and commercial terms of the cooperation are not disclosed
5) Collaboration with Harvard University on development of new class of antibacterials. Under the agreement, researchers at Harvard and Evotec will collaboratively identify and optimize small molecule inhibitors of bacterial cell wall synthesis, based on enabling technologies and chemical starting points licensed from Harvard. Using its comprehensive drug discovery infrastructure and expertise in addressing anti-bacterial targets, Evotec will specifically target peptidoglycan biosynthesis (PGB). The approach leverages promising chemical starting points, biological and structure-guided techniques allied with extensive medicinal chemistry expertise. The commercialization of the resulting assets will be through Evotec.
Expected newsflow
The newsflow should continue to be significant in the near future. For 2013, the company expects: 1) Start at least three clinical trials within existing alliances within 18 months; 2) Commercialization of one Cure initiative; 3) Initiate 3-5 more Cure X/ Target X programmes; 4) Further long term deals with mid-size Pharma; 5) At least one new integrated technology disease alliance; 6) Operational start of new compound management facility in US East Coast.
As far as clinical stage pipeline is concerned, a significant advance is expected within the next 24 months: 1) 2 nd Phase III trial results from DiaPep277 in Diabetes at the end of 2014E; 2) Phase II trial results with EVT 302 in Alzheimer disease in 2015E; 3) Start of Phase II trial with EVT 100 series in 2013/14E.
Intensive newsflow continued into 2Q/13…
And more to come in 2H/13
| Overview of the expected newsflow | |
|---|---|
| Event | Timeline |
| Commercialization of one Cure X initiative | 2H/2013E |
| Initiate 3-5 more Cure X/ Target X programmes | 2H/2013E |
| Long-term deals with big/mid-size Pharma and Biotech | 2H/2013E |
| At least one new integrated technology disease alliance | 2H/2013E |
| Operational start of new compound management facility in East Coast. 2H/2013E | |
| Start min. three clinical trials within existing alliances | Within 18 months |
| DiaPep277: Results from 2nd Phase III trial (recruitment closed) | End of 2014E |
| EVT 302 (Alzheimer's disease): Phase II trial results | 2015E |
| EVT 100 series (Depression): Start of Phase II trial | 2013/2014E |
Source: Evotec AG; CBS Research
Pipeline overview
| Diabetes | |||||
|---|---|---|---|---|---|
| Molecules | Indication (mechanism) | Partner | Status | Next milestone | Commercials |
| DiaPep277 | Type 1 diabetes (immunomodulation) |
TEVA/ Andromeda |
2nd Phase III recruitment closed |
Final Phase III data | ~EUR 40m milestones, royalties; potential market ~EUR 500m |
| EVT770 | Type 1 and 2 diabetes (beta cell regeneration) |
MedImmune/ AstraZenec |
Pre-clinical | ND | High margin research payments EUR 237m milestones/ product; |
| ALM | Type 1 and 2 diabetes (beta cell regeneration) |
a MedImmune/ AstraZenec |
Pre-clinical | ND | significant royalties High margin research payments EUR 18m milestones/ product; |
| EVT070 | Type 1 and 2 diabetes (beta cell regeneration) |
a Boehringer Ingelheim |
Pre-clinical | ND | significant royalties High margin research payments EUR 254m milestones |
| CureBeta CB 002 /1 + |
Type 1 and 2 diabetes (beta cell regeneration) |
Janssen | Pre-clinical | ND | Significant royalties High margin research payments USD 300m milestones/ product; |
others significant royalties Neurology
| Molecules | Indication (mechanism) | Partner | Status | Next milestone | Commercials |
|---|---|---|---|---|---|
| EVT302 | Alzheimer's Disease (MAO-B) |
Roche | Phase IIb | Phase II completion, Phase III start |
USD 820m milestones; Significant royalties |
| EVT100 series |
Depression (NR2B) | Janssen | Phase II/ pre clinical |
II, Phase III start Confirmation of pre clinical study; Phase I/II |
USD 60m milestones; Significant royalties |
| EVT201 | Insomnia | Jingxin | Phase II | start Start clinical trials |
Milestones; Royalties |
| Various | Huntington Disease |
CHDI | Target validation | NA | Research payments |
| ASIC family | Multiple sclerosis | BMBF/ undisclosed |
Lead generation | Lead status | ND |
Pain and inflammation
| Molecules | Indication (mechanism) | Partner | Status | Next milestone | Commercials |
|---|---|---|---|---|---|
| EVT401 | Inflammation (P2X7 inhibiton) |
Conba Group |
Phase I/II | Phase II start | ~EUR 60m milestones; Royalties |
| Various | Endometriosis | Bayer | Pre-clinical | Pre-clinical candidate |
Upfront EUR 12m; total value up to ~EUR 580m; Royalties |
| Various | Various / Pain | Boehringer Ingelheim |
Pre-clinical | Phase I start | Research payments; Milestones; Royalties |
| Various | Inflammation | UCB | Pre-clinical | Phase I start | High margin research payments EUR 183m milestones/ product |
| Undisclosed | Various/Pain | Novartis | Pre-clinical | Successful PoC | Significant royalties Research payments; Milestones; Royalties |
Oncology
| Molecules | Indication (mechanism) | Partner | Status | Next milestone | Commercials |
|---|---|---|---|---|---|
| DG3173 | Acromegaly / NET | Aspireo | Phase IIa | Phase II data in acromegaly |
Consulting fees; Royalties |
| Various | Various | Boehringer Ingelheim |
Pre-clinical | Phase I, First in man | Research payments; Milestones; Royalties |
| Pathw ay screen |
Cbl-B pathw ay |
Apeiron | Pre-clinical | Pharma partnership | Shared research costs; Milestones; Royalties |
| Epigenomics targets |
Various | Belfer Institute |
Pre-clinical | Pharma partnership | NA |
Source: Evotec AG; CBS Research
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+49 (0)69 -977 8456- 12 [email protected] |
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Disclaimer and statement according to § 34b German Securities Trading Act ("Wertpapierhandelsgesetz") in combination with the provisions on financial analysis ("Finanzanalyseverordnung" FinAnV)
This report has been prepared independently of the company analysed by Close Brothers Seydler Research AG and/ or its cooperation partners and the analyst(s) mentioned on the front page (hereafter all are jointly and/or individually called the 'author'). None of Close Brothers Seydler Research AG, Close Brothers Seydler Bank AG or its cooperation partners, the Company or its shareholders has independently verified any of the information given in this document.
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Recommendation System:
Close Brothers Seydler Research AG uses a 3-level absolute share rating system. The ratings pertain to a time horizon of up to 12 months:
BUY: The expected performance of the share price is above +10%. HOLD: The expected performance of the share price is between 0% and +10%. SELL: The expected performance of the share price is below 0%.
Recommendation history over the last 12 months for the company analysed in this report:
| Date | Recommendation | Price at change date | Price target |
|---|---|---|---|
| 05 June 2013 | BUY (Company Update) | EUR 2.75 | EUR 3.90 |
| 26 March 2013 | BUY (Company Update) | EUR 2.36 | EUR 3.90 |
| 18 December 2012 | BUY (Company Update) | EUR 2.73 | EUR 3.90 |
| 08 November 2012 | BUY (Company Update) | EUR 2.82 | EUR 3.90 |
| 26 October 2012 | BUY (Company Update) | EUR 2.69 | EUR 3.90 |
|---|---|---|---|
| 28 September 2012 | BUY (Company Update) | EUR 2.71 | EUR 3.90 |
| 11 May 2012 | BUY (Company Update) | EUR 2.37 | EUR 3.70 |
| 20 September 2012 | BUY (Company Update) | EUR 2.67 | EUR 3.90 |
| 08 August 2012 | BUY (Company Update) | EUR 2.69 | EUR 3.80 |
Risk-scaling System:
Close Brothers Seydler Research AG uses a 3-level risk-scaling system. The ratings pertain to a time horizon of up to 12 months:
LOW: The volatility is expected to be lower than the volatility of the benchmark MEDIUM: The volatility is expected to be equal to the volatility of the benchmark HIGH: The volatility is expected to be higher than the volatility of the benchmark
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