Evotec SE

Dear ladies and gentlemen, welcome to the conference call of EvoTech SE. At a customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Werner Landtaler, CEO, who will lead you through this conference. Please go ahead.

Thank you very much. Welcome to our annual report 2020, The Data-Driven R&D Autobahn to Cures. It's great that you're on this call, and thank you so much for following Evotec. If you go to page two of the presentation that we put out there, and that I invite you to follow throughout this conference call, let me first tell you that I'm here together with my team in Hamburg, and I'm very happy to be here with Enno, Our CFO to be here with our COO Craig and our CSO Cord. And let me start by thanking the whole company, but also my closest team for a very special 2020. We did what every company should do. We were looking for the opportunity within the global pandemic crisis. We were forced to re-examine all our processes and practices and we did it. And we took the chance to take the very best out of this moment and we want to keep the best practices for the time beyond the COVID crisis which will come and where we will come even stronger out of that crisis than ever before. With this, let me tell you that Evotec is in a strong situation Maybe it's fair to say that we're in a very strong situation. As I'm talking about the team, I would also like to highlight and congratulate Cord to his appointment to the German Council for Science and Humanities. This is fantastic for Germany, Europe, but also the world, because with this we bring A person who is really outstanding into the essential questions that will lead the industry forward, that will lead the society forward. And with this, I'm very happy that we were able to see this appointment from Cord into this system. When you go to page number four of the presentation, I want you to see some of the highlights and also some of the lowlights. that marked our last year. The data-driven autobahn to cures is very long and will only end once all currently untreatable diseases are cured. So let me first look back a bit into 2020 where you have seen many things happening and these things are just the beginning that lead us on this R&D autobahn forward which is a multi-track Autobahn. 2020 is marked by very good progress in our co-owned pipeline which is the essence of our business model. And here we are very well on track to build the largest royalty pool in the industry that has ever been built. We saw new and extended innovative partnerships especially in kidney diseases, in protein degradation and also in rare diseases and Cord will talk more about that. With just Evotec Biologics, we are gaining very strong momentum and we see how disruptive novel technology can be in the world of biologics. And this is also the reason why our J-POD 1 is in full swing very soon in the second half of 2021. And Craig will also talk about J-POD 2, which we have initiated. We saw multiple new and extended Evotec execute integrated drug discovery and development alliances and also here you see a platform that becomes an essential innovation hub for the industry growing every day. We are very happy about the successful integration of our new modality gene therapy out of Oort in Austria and you see the acceleration of our innovation platforms which go from EvoCells, Evopanomics and EvopanHunter basically into a very long-term strategy which we now call Action Plan 2025 and which is introduced this year into the operations of Evotec for the long strategy building of this company. We are very happy that our strategy which we initiated about five years ago to build bridges is coming. to a critical moment and also sees a lot of momentum where the translation from science to the industry via our industrial bridges is really fantastic for academia but also for the industry and last but not least let me also at this point in time thank many of the long-term investors who endorse our strategy and make the company with us better every day. If you go to page number five of this presentation You should appreciate that all guidance elements have been met comfortably despite the fact that we had many things to counterbalance and don't forget that this is all happening in a year of the pandemic. If you go to page number six of this presentation, you should see that our data-driven Autobahn to Cures is truly global. Evotec is the best possible innovation hub for new technologies better precision medicines, and better global access for more efficient and more precise drugs of the future. Page number seven is the point where I want to raise the question to you, why should you not be very comfortable with our current strategy? There is no reason not to be comfortable with our current strategy, and the main underlying reason to fully believe in what we're doing is our talent that we can attract and that we can retain. It's simply fantastic to see how many great people joined the company and how many great people we have in the company. And with more than 500 top talents now together with us driving on the R&D Autobahn to cures, it is gaining momentum every day what we are doing to bring more cures to patients. If you go to page number eight, you see that top talent needs top leadership. With very good leaders, we multiply the power of our teams. And in this spirit, we are very happy to show you only here eight fantastic leaders who joined the company and who all take over essential processes that are leveraging The power of leadership, but also the power of teams here in the company. If you go to page number nine of this presentation, you should see that we are following market trends that give us a lot of support for the direction where we are sailing. And it is great to have not headwinds, but backwinds where we are going. But most importantly for us is to see that from RNA transcriptomics, AI and machine learning technologies up to precision medicines, Evotech is not following the megatrends. We are leading these megatrends. And of course, if you look at the growth rates of these charts, you can imagine where our paths are going. If you go to page number 10 of this presentation, You remember that about five to ten years ago, we always had the vision to build a multi-modality R&D Autobahn. Today, we can say that the best of innovation is happening on an unbiased R&D Autobahn to cure the Devotec. So it's not only small molecules where we are driving, it is all modalities that we can provide to our partners in an unbiased fashion. With this, if you go to page number 11, you will in the future hear data and data and data again from us. But data is irrelevant if you cannot process data. And the beauty of Evotech is that we can collect, generate, understand, and translate data into the drug discovery processes better than any other company. And with this, we are fully prepared For the tsunami of omics data, not only to process it, but also to translate it into integrated and more efficient drug discovery than ever before. If you go to page number 12 of this presentation, you should see that our journey to accelerate the path and find new cures is just at the beginning, despite the fact that we are launching a new action plan, Action Plan 2025 today. It is an important step in the direction where we are going, but also here you can see that we are broadening our scope to become an essential platform and infrastructure for the industry. That's the secret behind Action Plan 2025, and that's why you can already today be certain that this will not be our last action plan in the long-term history of this company. If you go to page number 13, let me remind you of our business model. It is unique and it is idea to co-own with our partners and to have skin in the game with our partners. Why is this so important? Because for us, no disease is a commodity. For us, every disease has to be tackled as efficiently as possible and that's why we want to be as integrated as possible with our partners. Coming to this integration comes from four sources where we generate co-ownership. One is our multi-modality installation platforms, two is our indication-driven pipelines, three is our just Evotec biologics platform and four are bridges and other co-owning vehicles that we have built. With this, let me thank you and let me hand over to Eno who will bring you into our financial results of 2020.

Yeah, thank you, Werner, and a warm welcome also from my side today here from Hamburg. This is to introduce you to our financial performance 2020. And let's start on page 15 with a look on our consolidated numbers. 2020 was another landmark in EvoTech's growth of the last years. Thank you very much. due to the fade out of the Sanofi subsidy for the site in Toulouse and a lower level of milestone achievements partially due to the slippage triggered by the COVID-19 pandemic. Plus, a growing part of margin neutral IFRS 15 sales being recognized. R&D expenses increased by 9% compared to last year's level, especially driven by further enhancing our multiple platforms and Investing into our co-owned pipeline. The growth in SG&A stands at 16% and relates to the overall organic and inorganic growth, like, for example, the first-time addition of the first half 2020 numbers from just Evotec Biologics, the ramp-up of the J-Port 1 in Seattle, plus the added new business setup of Evotec GT in Austria, and the integration of the acquired biopark by Sanofi called BBS Biobank. in Toulouse. The other operating income turns out to be roughly on the last year's level and contains two main components, R&D tax credits and the Sanofi recharges for ID Lyon. All in all, that development results in a slight increase of the other operating result. With a total of 106.6 million euros Our adjusted EBITDA lands well within our communicated guidance and I will give you a more in-depth overview on the EBITDA development on page 21. The net income amounted to 6.3 million euros and besides the reduced operating income, consolidated operational losses from our equity portfolio and FX losses contributed to the reduced number in comparison to the previous year. Moving to slide 16. Looking at the two segments, both segments continue to stay on a strong growth path. The year-to-day execute revenues, including intersegment revenues, amounted to 489 million euros, coming from 420 million in 12 months 2019, which translates into a 16% increase. The execute gross margin for 2020 was at and thus exactly on last year's level. The adjusted EBITDA for execute came in at €129.3 million, which was well ahead of last year's adjusted EBITDA level of €122.5 million. Innovate revenues year-to-date amounted to €105.7 million, which is a strong 12% above last year due to higher base revenues. including higher project revenues and added long-term partnerships and again despite lower level of milestones than in 2019. Innovate's total R&D amounted to 69.9 million which is 7% above last year. SG&A accounted for 15.5 million also slightly above last year. The adjusted EBITDA for Innovate was negative but within the expected range and amounted to minus 22.7 million euros versus last year's 0.6 million, slightly positive. Main reason was the anticipated lower level of achieved milestones in 2020. Looking at the quarter on Q4 on page 17, coming to the Q4 results, we see the positive impact of a strongly developing base business. Q4 2020 numbers, again show a good 12% gain on the revenue line, reflecting the excellent base business and despite very high level of realized milestones in the previous year. This becomes also evident in a very good gross margin of strong 26%. R&D expenses increased by 4% to 17.9 million, exceeding last year's already strong level of R&D investment. SG&A expenses show even a decrease by minus 6% versus last year due to additional saving effects and COVID-driven lower travel and training costs and despite further FTE growth in that field. The impairment of intangible assets of 3.2 million euros is linked to our participation in Haplogen, who lost an important financing partner, so that the development of the underlying projects was no longer secured and triggered the impairment. The adjusted group EBITDA for Q4 turns out with a very good 29.7 million euros, practically remaining on last year's level despite less margin-strong milestones. Moving on to page 18, looking at the year-on-year revenue development, The increase is completely driven by a strong base business reflected in the organic growth of additional 63 million euros versus last year. This is a strong evidence for the high revenue quality, especially coming from our sustainable repeat business with our long-term partners and this even with a lower milestone level than in 2019. Portfolio development includes effects from the end of the Sanofi Toulouse payments and the effects from the not comparable first half year 2020 financials for Just and Dayport as first consolidation took place from July 2019 onwards only. Mostly due to the weakening US dollar against the Euro in the second half of 2020, revenues were also negatively affected by the currency effect of minus 6.8 million euros, meaning that the overall sales development at constant 2019 FX rates would have even been better or higher, namely ending at 507.7 million euros. Coming to page 19, the EBITDA bridge visualizes that its development was negatively impacted by anticipated portfolio effects, especially the termination of the just described Sanofi Toulouse subsidy and a negative FX effect coming from a weaker US trend in the second half of 2020. Netting out these two factors, Evotec shows an organic increase compared to 2019, despite corona challenges and lower contribution from milestones. In the end, the achieved 106.6 million euros stayed well within our unchanged guidance for 2020. Slide 20. Slide 20 summarizes EvoTech's very solid non-P&L related financial KPIs. They confirm the company's strong standing during these demanding times and have been all substantially further improved. Total liquidity increased to 482 million at that point in time. This was fueling the balance sheet up 24% while the equity ratio at the same time steps up to more than 49% and the net debt position including IFRS 16 nearly flips into a net cash position actually. Overall, a very solid position with which we feel very comfortable to meet and fulfill our ambitious business goals in 2021, furthermore indicating sufficient headroom to invest into organic and strategic growth. With this completes the financial overview and I would like to hand over to Cord for more details from the operating perspective. Thank you all and Cord, please take over.