Evotec SE

Welcome to our Q3 call. Resilient into the future of biopharma R&D. That's how we titled this presentation, which we have uploaded to the internet and you are welcome to join this call also with the presentation. Resilience is all about being able to overcome the unexpected. Our goal is to follow science and technology and thrive together with our partners. So you will see throughout this presentation that resilience is not what happens to you. Resilience for us is how you react to something, how you respond to something, and how you recover from what happens to you. I'm here together with my team, which you see on slide number three of this presentation, with Leticia, with Matthias, with Craig, and with Cord. And I want to thank them very much for driving resilience into our company stronger than ever before. If you go to page number five of your presentation, you see the highlights. And I want to stress, it's basically only highlights on our Q3. And if we reflect a little bit on this year, you see that we are going strong again with a cyber attack in the rear mirror now. And when I say we go strong again, reporting double-digit growth of 14% on top line and 13% on bottom line despite the cyber attack is a great result. More importantly, we are driving this company into the long-term future and here just a few events that highlight that. For example, a major collaboration in neuro degeneration together with BMS was started in 23. For example, the continued validation of our JustEvoTech biologics business where we have an excellent pipeline building moment that we witness all together here. The tech alliance with Sandor also in agreement with the Department of Defense highlight this and make our second J-Port that we are building in Toulouse an absolutely vital investment into the future. We are building pipelines together with our partners. That's the measurements that you should take in looking at value increase of Evotec into the future. So strong progress in our pipeline building efforts. is highlighting value creation into the future. Here, we'll then talk a bit in the later part of this presentation about multiple events that are happening that are driving this value forward. What you should also appreciate is that we are following science and not only by, for example, translating science with Novo Nordisk or out of Singapore via our bridges, we can highlight this commitment. and of course we are more than ever and fully committed to our ESG topics which are highlighted here on our SBTI targets. Yes, there is a lot happening in the company and of course we are also aware that this is happening in light of not so easy biotech times out there because after COVID times there was of course a bit of a Market Volatility, where we think that our business model shows that we are clearly differentiated with our technology stack to many other companies who can only react to that crisis. We are creating opportunities out of this crisis. So I want to stress again that we really see our business model of Evotech more as the answer to the biotech funding crisis than as part of the problem. So, yes, we're going strong again. And if you go to page number six, this also is important because in times of short term volatility, long term goals and plans are more important than ever. We think that our differentiated platforms, especially panomics, will show that the future of Action Plan 2025 is just around the corner and that many, many goals that are written in this action plan 25 are already achieved and those who are not achieved yet will be achieved in 25. Of course you have to factor in here that just Evotech biologics will come fully online by the end of 24 and into 25 as many of the capacities are just in the process of being built. Our business dynamics are looking good. They are also looking good when we make a first view into 24 where I think again double digit growth will be absolutely possible for us in 24 and that shows you again the differentiation of our business model versus many other players on the market. With this let's look a little bit deeper into our Q3 results and with this I want to hand over to Letitia.

Thank you, Werner, and a warm welcome to all of you for joining us today to delve into our financials for the past nine months. Slide eight, as depicted in this slide, we had a very strong start to the year with revenues in Q1 2023 at 213.6 million euros, which is an implied growth of 30% versus Q1 2022. A robust underlying base business, as well as new strategic collaboration with Janssen and the expanded collaborations with BMS, have contributed to this excellent performance. In both Q2 and Q3, we confronted the repercussions of the cyber incident, which necessitated a brief shutdown in Q2 to safeguard our partners and stakeholders. This event resulted in missed opportunities of approximately 70 million euros. Throughout these challenging quarters, our drug discovery and development business were impacted. Despite these hurdles, we have persevered by expanding our operation and cultivating critical partnerships, like the tech partnership between Just Evotec Biologics and Sandoz. Our resilience was evident in our financial performance, with Q3 group revenue approaching €200 million and 9 months group revenue reaching €580.1 million, reflecting here again an increase of 14% compared to prior year. Moving to the next slide. I will provide here a summary of our selected balance sheet and cash flow details. Between December 31st of December 2022 and 30th of September 2023, total assets decreased slightly by minus 2.7 million euros to 2 billion 254.5 million euros. There is a shift in the asset composition reflecting the allocation of cash equivalents towards CAPEX investments. Our stockholders' equity as of September 30th, 2023 decreased by 46.4 million euros to 1,140.8 million euros compared to the end of 2022. This change is attributable mainly to the net loss resulting in an equity ratio of 50.6%, slightly decreased from the 52.6% reported end of last year. We still maintain a strong equity position, ensuring a solid foundation for future investments and maintaining financial flexibility. Operating cash flow in the first nine months was 15.2 million euro compared with 236.2 million euro 6 million in the first nine months of last year. The comparable figure last year was driven by a 200 million upfront payment from BMS. The lower figure this year is impacted by the cyber incident, but it is partially offset by received payments related to our BMS collaboration in euro and protein degradation. Cash and cash equivalents amounted to 499.4 million euros as of September 2023. The increase is a result of a higher share of our short investments within our group liquidity. Our total liquidity decreased to 613.4 million euros as longer-term investments matured and have been used to finance capital expenditures. Capital expenditures amounted to 150 million and were at a similar level than nine months last year with 157.2 million. The spend in both years was to a large extent driven by building our capabilities and capacities for just Evotec Biologics, both in the US and in Europe. Our cash investments in affiliates and associated companies were significantly reduced to 15.8 million euros compared to 70.7 million euros last year. Moving to the next slide, group revenues for the first nine months of 2023 demonstrates a robust 14% increase. reaching 580.1 million euros fueled by a diverse business portfolio in a challenging environment. Key growth drivers included our BMS Celgene programs and the successful delivery of work packages as part of our new technology partnership with Sandoz. Base business kept growing, increasing by 14% from 502.7 million euros in nine months last year to 575.3 million euros in the first nine months this year. Evotec received milestones, upfront and licenses payments of 4.8 million. Just Evotec Biologics contributed 74.1 million during the nine months of this year versus 27.9 million euros in the comparable prior year period. Here we've nearly tripled its revenues within 12 months. Switching now our focus to cost management, the cost of revenue for the first nine months of 2023 amounted to €442.7 million, yielding a gross margin of 23.7%. The increase of margin was supported from signing the corporations and partnerships with BMS and Sandoz. Excluding effects related to the capacity built at just Evotec Biologics, total gross margin would be 26.7% versus 27.3% during the same period last year. Unpartnered R&D expenses were 45.7 million euros, 10% lower than the comparable prior year period. This decrease was influenced by a temporary reduction in R&D costs stemming from the cyber incident. Our adjusted group EBDA, which does not include external one-off cyber-related costs for the nine months ended September 2023, amounted to 50.2 million euros, which is the result of missed opportunities after the cyber attack, as well as higher cost to manage adverse effects of the incident. Internal cost of recovery in Q3 2023 were mitigated due to improved cost structures. Therefore, adjusted EBDA in Q3 2023 to 16.3 million euros versus 11 million in Q3 2022. The nine months 2023 adjusted EBDA excluding just Evotec biologics would average 55.9 million. Moving to slide 11, our guidance remain unchanged as previously outlined in our business update in July with revenue expected in the range of 750 million to 790 million euro. Unpartnered R&D expenses estimated at 60 to 70 million and an adjusted EBDA targeted of 60 million to 80 million for the full year. Regardless of the treatment of the one-off external cyber cost, we expect EBDA guidance to be met. Moving slide 12. I would like to share our latest update on our key activities focusing on cost efficiency and optimization. First, in the pursuit of a linear process across all our sites, we are making great progress. We have focused on optimizing our headcount and various cost containment measures, leading to significant savings in 2023. Early October, Evotech has engaged into the social process of redeploying its chemistry activity out of Marcy, Lyon, and in parallel, we are gearing up for a focused ERP build-out in the UK and at J-POD Toulouse in Europe. From a cash optimization, investments in CAPEX have been reprioritized, and we expect 50 million reduction by year end 2023, as well as reduced equity investments. The good news is that our diligent efforts have not gone unnoticed. We can confirm expected full year savings of 25 million, which is a testament to the effectiveness of our initiative in both cost optimization and efficiency. We will continue to pursue our 2025 strategy for sustainable growth and cost management, remaining dedicated to our shareholders and our overarching mission for medicine that matter. To conclude, we are shaping a more efficient and resilient future where research never stops. Thank you for your trust and support as we continue this remarkable journey. That said, I will now pass the floor back to you, Werner.

Thank you, Leticia. If you go to page number 14 of this presentation, we want to highlight the paradigm shifting platforms are our key growth drivers. We are very proud of our end-to-end shared R&D service platforms. This is the foundation of stability into our long-term growth. This is the foundation of our quality services that we are delivering. But I already mentioned that our differentiated technology platforms are key drivers for our long-term and future success. This comes on top of our end-to-end shared R&D platforms. And if you look at this graph, you see the big drive that comes from panomics and from just Evotech Biologics, just to mention two platforms here. And this is why we often say We are just at the beginning of paradigm shifting platforms that will shape this industry. And if you go to page number 15, we are shaping this industry by pipeline building with Parnomics and other technologies throughout the industry. And please don't forget, it is our long-term goal to build the largest royalty pool in the industry through our partnered R&D model. The numbers that you see on that slide speak for themselves. The 15 billion in milestones are already contracted. The 8% to 10% royalties are already contracted. The milestones will come and will provide an important driver for profitability and profitable growth into the future. That's why we are so proud of our partners and the partnered pipeline that we are building here. This is enormously efficiently leveraging our R&D platforms into pipeline building efforts. And on page number 16, you see that when we're describing our pipeline building efforts, we often use this image of an iceberg because you only see the top at this stage. And on the top, You see 18 projects in the clinic or close to the clinic at this stage. But what you should see that there are more than 120 projects that are filling that pipeline into the years to come. So it's almost irresistible to see more news flow out of this iceberg into the future. And if you go to page 17, here are just a few highlights of co-owned or partnered projects where a new flow is going to come. And where the beauty of our business model is that the data point is typically always generated on the costs taken by our partners. And that's why for us, this is always a free option to the upside and no downside that comes with the generation of these If you go to page number 18 of this presentation, let me jump again to another paradigm shifting platform, which I already mentioned once today, just Evotech Biologics. Why do we say paradigm shifting? Because continuous manufacturing will shape a high cost industry into an affordable industry. Fully continuous manufacturing will create access to so many more people for biologics that this is something where the term paradigm shifting is clearly well deserved. And if you look at the two pictures here, maybe it could be a bit better visible. But what is visible here is that on the lower picture, there's nothing. And on the picture on the higher part of this page, There is J-Pod number two existing. And this is not any AI. This is reality in a picture here. We're only in 12 months. It is amazing what our people at Evotech do. And let me thank the whole organization for creating such a massive movement, not only in J-Pods, but everywhere on our platform. If you go to page number 19, making this effort wouldn't make sense if markets wouldn't support us. And we couldn't be more excited about the validation that we see for just Evotech Biologics, even here in not the easiest times of the overall biotech market. But we are finding that our capacity for discovery and development is already very, very well filled. And we are ramping up additional capacity on the basis of future demand. And there are multiple discussions ongoing into 24 and 25 already. So obviously, 24 is excellently filled for just Evodec Biologics already. And 25 will be filled through our business development pipeline, which is being built here. Mentioning the number of 850 million contracted sales just gives you comfort here that we have eight times higher contracted sales than only one year ago. If you go forward in this presentation and if we jump back to our governance and to our impact that we want to have as a company, let me highlight that it was important, that is very important, and you see it on page number 21, that near-term science-based targets are validated and approved now. Why is this important? Because we always said we want to keep our ESG promises and have aligned our commitment here with our partners to follow the Paris goals. Like most larger companies, we have now validated science-based targets by SBTI. And you will see that this is published on our website as of tomorrow and it is an important signal that as a company we want to make a contribution not only to patients but also to the planet and if you go to page 22 we want to thank the analysts who are recognizing what we are doing here because a company that gets upgrades by doing more for the planet I think is also good for every portfolio of an investor to be held. And having here Ecovadis for example stepping up in their rating for us is a good latest signal that we can report. Page 23 is again highlighting the three dimensions on ESG where we are keeping our promise. The environment, our social impact and our governance. On our social impact we want to make also internally the best of the company every day. So that's why voicing what can be improved is important. And that's why as of tomorrow, 5,000 people will be part of an EvoVoice, what we call pulse test and engagement survey to see how we can even better as a company internally, but also towards our partners. If you go to page number 24, let me come to governance. Because having the best people around us is key for our long-term success. And that's why we are so proud of our existing supervisory board, but we are also so proud that we are permanently able to upgrade our supervisory board with people who have shown that they are shaping the industry with their intellect, with their personality and also with their business acumen. We're very proud that Rupert Vesey is suggested to be nominated for membership on our supervisory board and will stand for vote in our next annual general meeting in June 24. So it's fantastic that Rupert will join this company. and you will see that this is also great for not only Evotec but also our partner network. Going to page 25, you should see that despite the fact that we had several hiccups this year, we are resilient and resilience is what you make out of it. And that's why achieving our goals is the plan and we're executing on our targets and we are going forward towards Action Plan 25 and beyond as we speak. And with this, let me thank you because 26 shows you and is the invitation to you not only to come to our next week's Capital Market Day, but also to follow us in the long run into 24, 25 and beyond. And page 27 rounds up this presentation again by highlighting that our Capital Markets Day next week We'll show you how paradigm-shifting technologies like panomics and like IPC-driven drug discovery changes the world and where you can witness how Evotech is a big part of that. Thank you so much. We are looking forward to your questions.