Evotec SE — Investor Presentation 2015

Mar 24, 2015

Evotec 2014 – Execute on Innovate

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.

Welcome to Evotec!

Your management team

Agenda

Highlights 2014

EVT Execute & EVT Innovate

Financial performance 2014

Outlook 2015

Strong performance in EVT Execute, acceleration of biotech value generation in EVT Innovate

Highlights & lowlights

EVT Execute

• Important new and extended alliances (Shire, Convergence, CHDI)
• Important milestone achievements (e.g. Bayer, BI,…)
• Expansion of EVT Execute capabilities and capacities (e.g. protein production)

EVT Innovate

• Good progress within clinical development projects (EVT302, EVT100 series, EVT201, EVT401)
• Cure X and Target X strategy significantly expanded
• Multiple milestones in TargetAD collaboration
• New development collaborations (e.g. Second Genome) (after period-end)

Corporate

• Successful acquisition and integration of Bionamics GmbH and Euprotec Ltd.
• Signing of definitive agreement of strategic alliance with Sanofi (after periodend)
• Setback and impairment of DiaPep277® and EVT070
• CureBeta phased out
• Slower progress within BI oncology projects

Strong revenues from EVT Execute – Accelerated investments for long-term upside in EVT Innovate

Financial highlights 2014 – Guidance 2015

Financial highlights 2014

• Base revenues up by 7% to € 73.4 m, Group revenues up by 4% to € 89.5 m (2013: € 85.9 m)
• Strong revenues from EVT Execute (€ 93.3 m including € 18.5 m intersegment revenues) and adjusted EBITDA margin of 24%
• Increased investments in EVT Innovate: Group R&D expenses of € 12.4 m
• Group adjusted EBITDA positive at € 7.7 m and € 22.1 m for EVT Execute
• Strong liquidity position at € 93.1 m (Liquidity adjusted for M&A)

Guidance 20151)

• Revenues: >20% growth2)
• Adjusted EBITDA positive3)
• R&D expenses between € 15 m and € 20 m
• Liquidity is expected to be well in excess of € 100 m at the end of 20154)
• Capex investments up to € 10 m

⁵ 1) Varies from the guidance provided in the Annual Report 2014 following the financial impact of the Sanofi transaction 2) Excluding milestones, up fronts and licences

³⁾ EBITDA excludes impairments on intangible and tangible assets and goodwill as well as the total non-operating result

⁴⁾ Excluding potential M&A activities

Agenda

Highlights 2014

EVT Execute & EVT Innovate

Financial performance 2014

Outlook 2015

Clear long-term strategy

Strategy overview – Action Plan 2016

Improving R&D capital efficiency

Pre-clinical development candidate "PDC" – Evotec's "Sweet spot"

ONE company – TWO segments

EVT Execute & EVT Innovate

Sanofi accelerates EVT Execute and EVT Innovate

Closing of alliance 31 March 2015

Excellent capabilities, capacity and pipeline projects

Summary of Sanofi alliance

Financials	• Guaranteed commitment of approx. € 250 m over the next five years, including upfront cash payment of more than € 40 m • Master service agreement for drug discovery services with Sanofi improves revenue growth and profitability • Increased capacity for EVT Innovate and EVT Execute with minimal Capex investment and dilution to shareholders
Pipeline & Innovation	• Addition of first-class team with significant oncology expertise • Addition of a pipeline of more than 10 oncology projects • Sanofi screening library available for third-party collaborations • New "Bridge" from academia to Pharma in France and EU

Significantly expanded global footprint in 2014

Evotec overview – A step function increase from approx. 650 to 860 scientists

Operations & sales representation (Boston, Tokyo)

Integrated discovery platform

EVT Execute

Ground-breaking Hit Discovery Initiative

From high-content screening to target selection – Sanofi's Screening Library

"Open Innovation" Hit Discovery Initiative

• Evotec's high-quality library with 400,000 compounds – combined with Sanofi's library of 1.3 million compounds – for third-party screening
• Combination creates world-leading hit discovery service with attractive commercial terms for Pharma and biotech

Growth driven by high-quality services

EVT Execute – Highlights & key goals

Highlights 2014

• Shire integrated alliance
• Outstanding performance within Bayer endometriosis alliance
• Expansion and extension of CHDI
• Multiple arrangements with VC firms to build "project financed companies"
• Strong performance in protein production
• Significant increase of global footprint for services especially in US
• Successful integration of Euprotec

Key goals for 2015

• New long-term alliances with big and mid-sized Pharma
• Expansion of biotech service network
• New integrated technology/disease alliances

Focus on causes not symptoms

EVT Innovate – Systematic, unbiased, comprehensive drug discovery

Fast growing portfolio of > 70 product opportunities

Partnership portfolio

	Molecule	Indication	Partner	Discovery	Pre-clinical	Phase I	Phase II	Phase III
	EVT3021)	AD
	EVT201	Insomnia
al c	Somatoprim	Acromegaly
ni	EVT100	CNS diseases
Cli	EVT401	Inflammation
	ND2)	Oncology
	ND2)	Oncology
	ND2)	Pain
al	ND2)	Oncology
c ni	Various	Endometriosis
cli e- Pr	EVT770	Diabetes – type 2/1
	ND2)	Pain
	ND2)	Inflammation
	Various	Oncology
	Various	Inflammation
	Various	Diabetes – type 2/1
	Various	Diabetes – type 2/1
	Various	Kidney disease
y er	Various	Oncology
v o	Various	Alzheimer's disease
c s	Various	Oncology
Di	Various	CNS/MS	NEU2
	Various	Diabetes	>5 further programmes
	Various	Neurology	>5 further programmes
	Various	Oncology	>10 further programmes
	Various	Pain & Inflammation	>5 further programmes

Acceleration and broadening of oncology portfolio

Sanofi oncology alliance

	Project	Hit finding/ Target ID	Hit-to-Lead	Lead optimisation	Pre-clinical development	Phase I
Advanced	EVTS001
Projects	EVTS002
	EVTS003
	EVTS004
	EVTS005
Early	EVTS006
Projects	EVTS007
	EVTS008
	EVTS009
	EVTS010
	EVTS011
	EVTS012
	EVTS013
	EVTS014

Translating first-in-class science to Pharma

"The Bridge"

2011	2012	2013	2014	2015
CureBeta (Harvard Stem Cell Institute)	CureNephron1) (Harvard, BWH, USC, AstraZeneca) TargetASIC1) (BMBF/undisclosed Pharma partner) Somatoprim (Aspireo) TargetPicV (Haplogen) 1) TargetCanMet (Debiopharm)	TargetImmuniT (Apeiron) TargetDBR (Yale) TargetSP (Internal) TargetFX (Internal) TargetPGB (Harvard) TargetKDM (Dana-Farber, Belfer) CureMN (Harvard) TargetEEM (Harvard) TargetAD1) (NBB/J&J)	TargetBCD (Internal) TargetSX (undisclosed) TargetDR (Internal) TargetColCan (Internal) TargetKX (undisclosed) TargetCytokine (DRFZ) Fraunhofer Initiative	French Academic Bridge …

Cure X/Target X strategy gaining momentum

EVT Innovate – Highlights & key goals

Highlights 2014

• Good progress within clinical development projects (EVT302, EVT100 series, EVT201, EVT401)
• Cure X /Target X strategy expanded and accelerated (TargetCanMet,…)
• Multiple milestones in TargetAD collaboration
• Second Genome product development alliance (after period-end)

Key goals for 2015

• Progress of clinical pipeline within partnerships
• Progress Sanofi oncology assets to IND
• Partnering of Cure X/Target X initiatives
• Expansion of top-class academic network

Agenda

Highlights 2014

EVT Execute & EVT Innovate

Financial performance 2014

Outlook 2015

Meeting goals despite certain setbacks

Results and guidance in 2014
in € m	2014	Guidance March 2014
Base revenues1)	+7%	High single digit growth
R&D expenses	€ 12.4 m	€ 10–14 m
EBITDA adjusted2)	€ 7.7 m	Similar level to 2013
Liquidity at year-end, adjusted for M&A	€ 93.1 m	> € 90 m

Strong growth and clear investment strategy

Condensed income statement based on segments for 2014

in € m

	EVT Execute	EVT Innovate	Inter segment elimination	Evotec Group
Revenues	93.3	14.7	(18.5)	89.5
Gross margin	30.7%	23.4%	–	32.8%
• R&D expenses	(0.9)	(14.2)	2.7	(12.4)
• SG&A expenses	(13.6)	(4.4)	–	(18.0)
• Amortisation of intangible assets	(2.2)	(0.3)	–	(2.5)
• Impairment result, net	–	(8.5)	–	(8.5)
• Other op. expenses (income), net	2.2	3.4	–	5.6
Operating income (loss)	14.2	(20.6)	–	(6.4)
EBITDA1)	+22.1	(14.4)	–	+7.7

• Strong revenues contributions of € 93.3 m from EVT Execute (Third-party revenues: € 74.8 m)
• R&D: Increased investment in Cure X and Target X initiatives within EVT Innovate
• Strong EBITDA1) of EVT Execute of € 22.1 m at high gross margin

Base revenues growth of 7% and positive EBITDA reflect strong performance especially in H2

Key financials FY 2014: Condensed profit & loss statement (IFRS)

in € m
	2013 Actual	2014 Actual	% vs. 2013	• Base revenues increased by 7% to
Revenues	85.9	89.5	+4%	€ 73.4 m
Gross margin	36.3%	32.8%	–	(2013: € 68.8 m)
• R&D expenses	(9.7)	(12.4)	+28%	• Impairment
• SG&A expenses	(16.6)	(18.0)	+8%	charges mainly for DiaPep277®
• Amortisation of intangible assets	(3.2)	(2.5)	–	and EVT070
• Impairments, net	(25.0)	(8.5)	–	• Adjusted Group
• Restructuring	(0.5)	–	–	EBITDA for 2014
• Other op. expenses (income), net	2.4	5.6	–	was positive and decreased
Operating income (loss)	(21.4)	(6.4)	–	compared to 2013
Operating result (adjusted)1)	1.2	(0.8)	–	mainly due to the
EBITDA2)	+10.4	+7.7	–	write-off of the Andromeda
Net income (loss)	(25.4)	(7.0)	–	receivable

Revenues increased due to strong base business – Decrease in margin reflects lower milestones

Revenues & gross margin

Write-off of the Andromeda receivable, FX rates and reduced milestones achievement impact gross margin

Investment focus on Cure X and Target X initiatives

R&D expenditure and SG&A overview

in € m

SG&A expenses increased to support

18.0 +8%

One-time impairments impact operating result

Operating result trend

Liquidity provides more flexibility for innovation investments; very solid equity ratio

Balance sheet overview

in € m

Segmentation shows to deliver momentum

Condensed income statement based on segments for Q4 2014

in € m

	EVT Execute	EVT Innovate	Inter segment elimination	Evotec Group	• Strong momentum in EVT Execute
Revenues	31.8	4.0	(5.2)	30.6	• Strong gross
Gross margin	42.0%	0.8%	–	41.6%	margin due to revenues from
• R&D expenses	(0.2)	(3.7)	0.7	(3.2)	milestones received
• SG&A expenses	(3.7)	(1.5)	–	(5.2)	in Q4
• Amortisation of intangible assets	(0.5)	–	–	(0.6)	• EVT Innovate on track
• Impairment of intangible assets, net	–	0.2	–	0.2
• Restructuring expenses, net	–	–	–	–
• Other op. income (expenses), net	1.2	(2.8)	–	(1.6)
Operating income (loss)	10.1	(7.8)	–	2.3
EBITDA1)	+12.2	(4.8)	–	+7.4

Very strong fourth quarter 2014

Q4 2014 results

in € m
	Q4 2013 Actual	Q4 2014 Actual	% vs. 2013	• Revenues and
Revenues	25.6	30.6	+19%	gross margin increased due to
Gross margin	40.0%	41.6%	–	revenues from
• R&D expenses	(2.2)	(3.2)	+47%	milestones received
• SG&A expenses	(4.3)	(5.2)	+21%	in Q4 and strong core business
• Amortisation	(0.8)	(0.6)	–	performance
• Impairment result, net	(22.0)	0.2	–
• Restructuring expenses	(0.1)	–	–
• Other op. income (expenses), net	2.7	(1.6)	–
Operating income (loss)	(16.5)	2.3	–
EBITDA1)	4.5	7.4	–
Net income (loss)	(19.9)	1.0	–

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Settlement with Andromeda/Hyperion

Key elements of settlement with Andromeda (February 2015)

1. Confirmation of Non-Involvement

Hyperion agrees to make a public announcement confirming that neither Evotec nor its legal predecessor had any involvement in any aspect or decisionmaking regarding the development of DiaPep277® and likewise

2. Compensation for Reputational Damage

Andromeda will pay to Evotec an amount in cash equal to US\$ 500,000 in particular for reputational damage

Agenda

Highlights 2014

EVT Execute & EVT Innovate

Financial performance 2014

Outlook 2015

Starting a strong 2015

Expected key milestones in 2015

EVT Execute

• New long-term deals with large and midsized Pharma and biotech
• New integrated technology/disease alliances
• Milestones from existing alliances

EVT Innovate

• Strong progress of clinical pipeline within partnerships
• Phase IIb data with Roche in AD alliance
• Expansion of network of top-class academic alliances
• Partnering of Cure X/Target X initiatives

Strong growth, profitable, even more innovation & cash

Guidance 20151)

1	Double digit top line growth	• More than 20% growth excluding milestones, upfronts and licences
2	Profitable	• Positive adjusted EBITDA2) • 100 m3) Liquidity is expected to be well in excess of €
3	Accelerated investments	• Increased R&D investments of approx. € 15–20 m in strategic Cure X and Target X initiatives to accelerate long-term clinical pipeline building • Continued Capacity and capability building with up to € 10 m

1) Varies from the guidance provided in the Annual Report 2014 following the financial impact of the Sanofi transaction

2) EBITDA excludes impairments on intangible and tangible assets and goodwill as well as the total non-operating result

3) Excluding potential M&A activities

Reporting dates 2015

3M/Q1 Interim Report	12 May
AGM in Hamburg	09 June
6M/Q2 Interim Report	12 August
9M/Q3 Interim Report	10 November

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