Q4 2021 Evotec SE Earnings Call
But first of all also thinking 19.
I'm here together with Craig and court in our C of O N O.
And it is a great pleasure.
To make another year together with you and close out another year together with you.
And we could close I was nothing together, if we wouldn't have a fantastic company together in place and behind Us.
So let me also take before we go into content take this opportunity and thank the whole company.
Whole heartedly for another fantastic year that we have completed a zebra pick in 2021.
This year brought us closer to our mission, where research would never stop.
Until all diseases can be treated more precisely.
Then they are treated now.
We've been shifting gears up in 'twenty, one to follow our mission stronger than ever.
If you go to page number four of this presentation.
Let us first briefly look back into the last year.
Which marks many highlights but also some low lights.
But overall it marks a fantastic year, following our long term strategy, which.
Which we call extra plant 25, the R&D out of onto cures.
Highlights of 'twenty, one can be marked by multiple new and extended integrated deals.
The opening of our <unk>, putting the right month, the initiation of our <unk> put in to lose.
Very good progress in our core on pipeline, which we call Evo Tech royalty pud because the long term mission behind it is to have a co owned pipeline with royalty inflow to Evo Tech.
We see excellent progress in our induced pluripotent stem cell and protein degradation partnerships.
Especially with Bristol Myers Squibb.
We see strong clinical developments and many of them are in the making.
We see multiple innovate partnerships, where court will talk about them in the presentation to come.
And we see a clear acceleration of our leadership in innovative platform technologies that bring probabilities of success up.
We launched our E M. P D, which is the largest and highest quality molecular patient databases on the planet, especially when it comes to selected indications for example, kidney diseases.
We are continuing our strategy on bridges, and we have launched a very important global initiative, which we called protect for pandemic preparedness.
Last but not least also in the globalization strategy of our company. It was important to also.
Make our mark even bigger in the United States by listing the company on NASDAQ and progressing multiple of our operational nature.
And diverse out there.
Yes, it's not only about highlights, but our company is living sculpture, where sometimes also things don't go that well.
And the discontinuation of the development of <unk>, which happened after period end is clearly something that we didn't expect and which was a low light too.
To call out.
You also see but that's something where we are in a good class of everyone in the industry right now some increased costs for capacity expansion and increased cost for energy and other elements along the supply chain, but overall the company is in a strong situation. Yes. It's fair to say we are in a very strong situation.
And if you go to page number five.
Strong drive forward and a strong ability to build a unique company.
Is called at Evo Tech extra <unk> 25.
Let me also here confirm our long term guidance goals for <unk> 25.
Because we see our macro environment truly supporting what we are building into the future.
So overall our strategy from good to great can be called action plan 25, and it is fully confirmed with our long term goals.
Page number six.
Shows you that the drug discovery and drug development hub as we are putting it together.
Is unique and it is setting the pace when it comes to quality and efficiency in many of the processes that we are building.
He will take increasingly is the benchmark in the industry that other companies tried to follow.
We see this by the best possible innovation platforms that we have built we see this with novel technologies like our leadership in AI and machine learning, we see this with our precision medicine platforms. We see this with more access to more efficient trucks for our partners that we have built.
<unk>.
If you go forward to page number seven.
You should see that learning curves are happening on our platforms more often than anywhere else.
Why is this important because that illustrates to you that at Evo Tech everyone wins when people are cooperating with us. It's the shared learning curves that mark our.
Shared economy for R&D.
This makes our environment so productive when it comes to sharing not only experiments, but also knowhow and learning curves in our partnerships.
And with this we see a very clear indication for our strategy not only to be strong but to even be stronger in the future because they are mainly tailwind behind our industry wide to drive that strategy.
Page number eight illustrates to you.
That we are on our strategy building. This R&D outbound to cures not only on all modalities, but also closer to our partners and closer to the academic centers, where we see true innovation happening.
Today, we are also reporting to you that at every site, where we are currently present, we are expanding our footprint into the future, which marks for you an indication that we see strong growth not only happening in 'twenty, one, but also coming into.
The next years.
Page number nine illustrates to you.
That a company like ours can only grow.
If we grow our talents.
So it has been an extremely rewarding year for us to see that we can attract top talent.
Wants to join <unk> and wants to get this company together with us for.
For the first time, we were able to recruit net more than 600, new employees into the company.
This is a remarkable but even more remarkable is that this is more than 30% Phds out of this new class in 2021 that we were able to recruit it.
It's a true scientific powerhouse that we are building, which is unparalleled in its scientific and its in its knowhow power on a global scale.
We are very happy that we are continuing this path and you can expect more than 600 talents to be recruited into Evo tech in 'twenty two.
When it comes to talent on the next page you see.
A series of pictures, which is just illustrating.
The great expertise that we're able to attract but nevertheless, let me first of all thank all 600, new colleagues in the company that they have trained our mission and we are very happy to get a.
With them.
But the page number 10 illustrates to you that for example lists Mortimer trained us to lead our safety efforts in the future that Valerie joined us to lead heavy capital intense project.
That Matthias <unk> will join US as of May 1st as new CBO that Sundar trying to us as an expert in biotherapeutics to lead our quality efforts and strategic efforts within just even take biologics.
We have hired a series of entrepreneurs and residents for operation of interest rates like macro sure like Denver, Huni, and like Dara Henry and that we have hired great expertise in our biologic sales strategy with for example, crystal joining us from another place, which was also selling biologics.
It's fantastic to build this company together with you.
And on the next pages also fantastic to translate a company with the right strategy integrate numbers.
Great numbers means for us not only that we are growing.
But that we are growing at the right pace at the right quality level.
And especially with the right partners.
So we're very happy to confirm that we have achieved all elements of our guidance in 'twenty one.
And that in 'twenty, one you also see a great quality.
Growth behind every single line here.
Why is this important because a company that is biased to go beyond a billion in sales by 'twenty five needs to be built on the right quality of sales.
Going forward a company that wants to lead R&D has to invest R&D into the right quality of R&D projects and with this also long term create the right quality of EBITDA that we want to bring together. So we feel very comfortable about the balance that we are striking here between.
First thing into the future.
With R&D and even increased R&D in 'twenty two as you will see but at the same time building a top growth quality company together here.
This is best illustrated by taking the next page page number 12, and looking a bit into the future.
And we are very happy that this will be.
The 12th year in a row with double digit growth on the topline.
12 in a row with double digit growth in the topline going beyond $700 million in euros up to $720 million as our initial guidance is strong growth with about 15%.
And partnered R&D will go up higher than ever because we see higher potential of our precision medicine platforms than ever before with about 30% increase here, we feel very comfortable with these investments.
And our adjusted EBITDA with about 105 million to $120 million will be at least stable if not strongly increasing a lot of this will depend on milestones that have to be achieved throughout the year.
Let me also stress that this is not only a year of strong growth in all traditional lines that they're reporting but that we are investing more than ever before into our strategic footprint to build the supporting growth platform.
Into the future.
So with about $300 million in Capex that we're spending throughout the whole footprint and into upgrading the organization. We are illustrating our strong belief in the strong demand behind the pipes the platform.
With this let me again, thank my team. Thank the whole company and but also thank you following us.
It's a pleasure to hand over now to <unk>, who will bring you into our numbers then to put the dialogue forward to court and to Craig and I will come back later.
Thank you Anna.
Also well.
A warm welcome to all of you from my side.
The audit of the financials and the results in substance have been completed and therefore regarding the content the audit can be considered complete.
However.
Some extended procedures have to be considered for example, new reporting format like the 20-F and extended ease of tagging, including our U S documents.
And while the thoroughness has priority over form and sometimes speeds the ease of process remains to be completed.
And once this is done the unqualified opinion this plant to be issued.
Thus the full report will be available on April 26 for you download.
And there you will find the same numbers that we present here.
To you today.
But let me start and come to the numbers.
The 12 month 2021 numbers show, an excellent 23% increase on our revenue line.
Substantially pushed by the positive development of our base business and by the realization of multiple milestones in particular in the second half of 2021.
The gross margin amounted to 24, 5%.
Slightly lower than last year's 35% and this was mainly due to the off mentioned end of the Sanofi subsidy for our site and to lose after Q1 2020 and adverse FX effects in 2021.
If adjusted for both effects.
Gross margin year to date 2021.
And here like for like comparison would come in at 25, 5% versus 23, 8% in 2020.
The planned increase in and partnered R&D expenses by 25%, namely $46 million versus $58 million leads to a 13% growth in overall R&D expenses.
This development is especially driven by further enhancing our multiple platforms and continued acceleration of our co on pipeline.
The increase of 37% and SG&A expenses versus last year is mainly caused by increasing head count and cost of our secondary NASDAQ U S listing we have and I was just referring to.
This rise in this position generally reflects our continuous growth efforts.
And this is for example, the ramping up of our operational jackpot in the U S. While initiating our second jackpot in Toulouse already.
Further part is about enhancing ongoing integration tasks and ensuring overall growth opportunities across the different sites.
The other operating income and expense stems slightly above last year's level and contains three main components R&D tax credits and the re charges for ideally on as the main positive building blocks.
And on the other side and in order to address the risk of a potential dividend interpretation of selected contracts by the tax authorities in context of a declared text we have recognized the provision amounting to $2 1 million within this line.
All in all this development resulted in a slight increase of 1% of this position.
With a total of $107 3 million euros, our adjusted EBITDA lands, well within our expectations and like for like we do recognize an increase of 18% against the previous year.
The net income amounted to $215 5 million and benefit substantially from a very positive one off effect in the non operating income, resulting from a revaluation of our <unk>.
Equity engagement due to the successful IPO in September 2021.
The next slide depicts our exceptionally strong milestone revenue record contributions of $49 5 million in 2021, mainly resulting from our longstanding BMS celgene collaborations and the new Takeda collaboration.
Our base business grew completely.
Organically by 18% overall and this despite negative portfolio and unfavorable FX effects.
Therefore, our base revenues adjusted for these two effects year on year, even grew 23%.
Margin wise, we arrived within expectations, which also.
Which was also supported by the successful realization of significant milestones as mentioned before.
The slight margin decrease versus last year's triggered by the same effects, namely Sanofi and ethics as just described for the revenue lines plus additional ramp up cost for the Jay project.
Yes.
In context of preparing for the successful launch.
Looking at the year on year revenue development. The increase was mainly driven by our very significant 27% organic growth of the business.
Reflected in the 135 million step up versus the last year.
This is another evidence for our continuously high revenue quality coming from a healthy mix of our sustainable repeat business with our long term partners and strong additional demand for our <unk>.
<unk> R&D offerings.
Mostly due to the on average weaker U S dollar against the Euro in the first seven months of 2021 Rep.
Revenues were negatively.
Negative affected by a currency effect of minus $9 2 million.
Thus at constant 2020 of X rates sales would have been even higher at approximately $627 million.
Looking at the two segments, both continued to grow and perform well, reflecting a broad basis of our growth for our growth.
Year to date execute revenues, including Intersegment revenues grew by 20% coming from $510 million in 12 months of 2020.
This was further driven by an increasing demand in the integrated offering.
R&D and a strong demand for our base business.
12 month, 2021, innovate revenues amounted to $147 million, which is an excellent 38% above last year. Due continued high demand for precision medicine reflected by expanding existing as well as several new partnerships and also due to the realization of substantial milestones.
In particular in Q3 and Q4.
Innovates total R&D amounted to $81 9 million, which was 17% above last year underlining, our continued investment and commitment into innovation projects and long term sustainability.
If you on the single Q4 results illustrates the accelerated growth we have realized in this particular quarter.
The 33% growth in our revenues has been pushed by a strong milestone contribution of $21 6 million and.
And a significant step up in base revenues compared to the three previous quarters and last year.
And in particular to be mentioned, just it would take biologics and development.
It would take execute segment performed.
Gross margin comes in at a good 27.8% and even exceeds last year's already high 26%.
R&D expenses grew grew slightly by 5%, while SG&A expense expanded by 80% to support operational and financial growth and reflecting the cost per hour going IPO agnostic.
All in all EBITDA is up 25% versus last year.
Net result, however was negative with minus $31 5 million.
Which after a very successful IPO of Accenture holding in September .
<unk>, mainly from a drop of the respective share price thereafter.
If you on the net income bridge shows the huge positive effect in the non operating result from the <unk>.
Of $225 million and FX movements of roughly $15 million.
This was partly offset by consolidated operational net losses from several equity participations in the amount of $16 6 million.
And in addition, the review of our equity participations resulted in an impairment of $2 million and fair value adjustments of $11 2 million.
Yeah.
On page 20, I would like to highlight the very positive operating cash flow of $122 2 million.
Capital expenditures of $118 9 million comprise mainly.
J P U S and other expansion expansion projects as well as lab equipment underlining the acceleration of <unk> overall business growth.
In 2021, we invested $22 $7 million into new and existing equity investments.
Finally, the capital increase with the dynastic listing over the NASDAQ listing in the U S. In November resulted in net proceeds of $403 1 million.
Yeah.
Slide 21, summarizes <unk> very solid and sustainable non P&L related financial Kpis.
The balance sheet is growing up by a significant 53% mirroring the ongoing dynamic growth of our business.
<unk> influenced.
Positive by positive effects touch.
Like our U S IPO as well as our positive equity portfolio performance.
Trade accounts receivable were higher than usual at the balance sheet dates due to $40 million of milestones and prepayments outstanding.
These invoices were all paid in the Meanwhile, and will reduce our DSO.
Days sales outstanding figure for Q1 2022, respectively.
In addition, again following our NASDAQ listing from November 2021, the equity ratio stepped up to a very good 62% and we can report a net cash position of $494 million. These factors together indicate plenty of headroom and flexibility to further invest.
Into organic and strategic growth.
Total liquidity consequently increased to $858 2 million at the end of the year, allowing us to continue planned capex investments to support projects such as J P. Redmond and J part to lose in Europe , as well as general expansion of our capacities across the various sites.
Furthermore.
It will equity engagements into new and existing equity holdings are anticipated.
And with this this completes the financial overview and I, therefore would like to hand over to.
Greg.
Thank you very much.
Thanks and good.
Good morning, good afternoon to everyone on the call.
To bring you into some of the scientific and operational details, which underpin the financial results you've just help.
Today, an integrated R&D the sweet spot performance lies at the intersection of the combination of high quality data generation the ability to extract predictive power from that data with AI and ml.
And inevitably there's still very human elements of track record and deep domain knowledge and expertise.
And we are continually evolving and developing our core capabilities and technology toolkit to maintain our leading position.
An example of this is Ian <unk>, our internally developed suite of artificial intelligence and machine learning and experimental cutting edge molecular design tools, which in the hands of our industry expels our lasers.
To hit the sweet spot of discovery and development performance.
And over again.
And the resulting credibility and the track record of success allows us to efficiently drive our growth through the combination of continuing partnerships expansions of existing relationships and the acquisition of new very high value partners.
Working with Novo Nordisk on gene therapy for example, or establishing anatomy work stream that Amgen are good examples of moving into new fields with existing partners.
And we're really delighted to start the first exciting projects with <unk> X, our new partner at the end of 2021.
Evil access or just even take biologics business continues to make great progress establishing itself as a high quality partner for the industry as well as a disruptive technology leader.
And as you can see on page 24, J, Paul Redmond was opened in 2021 and is already operational in the CMT E&P.
A major achievement for the team there and one of the high points for me in 2021.
And in parallel we are progressing our preparations for GE to lose which is on track to open in the second half of 2024.
These two facilities represented the majority of our substantial multiyear capital investments part of course expected to the major sources of revenue and profitability in due course.
On page 25, if we step back and look at the indicators of business mix and quality. We can see that the number of new partners is growing in line with business growth.
Adding diversity and resilience at the same time.
But perhaps the most important metric is that of repeat business.
Still holding strong over multiple years.
90% repeat customers. We believe this is a testament to the quality of the work we do right across the board.
And the high level of confidence that our partners have and the results that we generate.
So as a consequence, we have a strong order book and outlook for 2022.
Which in turn agenda is our own confidence and the investments, we're making to build even more growth opportunities and robustness and infrastructure with a long term perspective.
And with this I hand over to Claude to tell you more.
Got it.
Thank you Craig.
Good morning, and good afternoon to everybody on the call.
You would take innovate had a fantastic 2021.
<unk> innovate achieved a record.
Growth of close to 40%.
Thereby further accelerating its growth compared to previous years.
2021 is actually the strongest purely organic growth of Eva take innovate segment.
Over a 10 year history.
Despite a significant setback in our cone product pipeline with <unk>.
Overall, our pipeline of product opportunities continues to advance and mature as you can see on page 27.
At <unk>, we currently have a total of over 220 projects in our pipeline.
Each of these projects hold significant upside for <unk> in terms of milestones and royalties.
Equity participations.
Over 40 of these projects you could take.
You would take cones completely.
In advance of <unk> project as potential starting point for future pharma partnerships.
Overall this means that the pipeline is stronger and deeper than ever before.
The progress in our product pipeline keeps translating into clinical stage product opportunities as you can see on page 28.
Together with our partners <unk> currently has 14 molecules in clinical development.
Expected key milestones over the next 12 to 24 months are shown on the left hand panel of this slide.
Is it without going into any great detail, we would like to highlight that there are multiple value inflection points in terms of phase, one and phase II data coming.
In this timeframe.
Essentially all clinical development in another.
Under the control of our partners. It is difficult to comment on exact timelines for these milestones and we will certainly we'll provide updates as the programs progress.
On the next page page 29, I'm coming to some of our key platforms.
If you have followed our capital markets day earlier. This year you will recognize this slide Eddie.
<unk>, we have been building a precision medicine platform, which combines a patient centric approach with our mixed driven drug discovery.
It is our belief that patient centric and Omics driven drug discovery is very much focused on delivering drug candidates with superior efficacy and safety profiles.
That these drug candidates will have a higher probability of success in the clinic.
The key components of this platform position medicine platform are our molecular patient databases.
Molecular patient databases are essential for a deep molecular understanding of disease processes and thus the identification of the best possible intervention points.
A second component of this platform.
And.
Our direct patient derived IPC based stock screening platform.
<unk> derived human disease models model disease, more accurately and enable us to more vigorously test for disease relevant already in the preclinical setting.
And the key component.
Our panamax and Pan Hunter platforms, which enable us to profile diseases and compound profiles more comprehensively and more precisely using a multi omics approach.
Today, the slide primarily a reminder of our position medicine platform is that our precision medicine platform is not only increasingly the profitability of success, but they increasingly drive our dealmaking.
We have an excellent start into 2020 to signing deals with Lilly and Boehringer Ingelheim, which both carry substantial upside for <unk>. The deal with Lilly signed on the basis of our molecular patient databases and the deal with Boehringer ingelheim on the basis of our IPC drug screening platform.
The deal with Boehringer Ingelheim also opens up a new field for you will take mainly ophthalmology here, we will collaborate differing lines specifically in the field of age related macular edema.
Furthermore, based on our multi modality platform behalf achieved two key project expansion in our BMS newer collaboration one is in the field of a novel targeted protein degradation approach to key neurodegenerative targets and another one we announced last week here we have moved.
Mental sense based drug candidate forward into a BMS more degeneration collaboration.
So overall, we have an excellent start in 2022 with a number of deals and milestones already achieved today I would like to take a few minutes to highlight once again the potential of our molecular patient databases.
Which I'll come to on page 30.
We believe that molecular patient data will become increasingly important in defining diseases more accurately on the molecular level and thereby identify more suitable.
Intervention points.
We are continuously expanding our molecular patient databases into various diseases. Some of which are shown here on page 38.
It is important to point out that.
He will takes high performance Panamax platform.
Be able to generate these molecular datasets at high enough quality and cost effectiveness and without our AI and machine learning driven Pan Hunter analysis platform, we would not be able to interpret the data.
Molecular patient databases require more than just access to human samples.
On page 31, you can see that in particular, our <unk> XR patient databases and kidney diseases have delivered already five key partnerships in the last five years.
The first partnership designed to payer already in 2000 2016, 17 quickly followed by our 50 50, JV with <unk> pharma a key player in the kidney disease space.
In 2020, we signed yet another deal with Novo Nordisk and in 2021 bit of self funded biotech company focused on rare kidney diseases, which is called Chinook therapeutics.
The latest deal is the latest addition to the deal with Lilly, which we signed earlier this year.
He has a long standing interest in tradition in the field of metabolic diseases, and also complications of metabolic diseases, including kidney diseases.
Deal came with a significant upfront payment as well as about $180 million towards potential solar moslem potential per project, plus tiered royalties as well as research payments.
This pipeline of deals is a strong indication that molecular patient databases will become increasingly important in the pharma industry and they highlight the enormous commercial potential for <unk>.
At <unk>, we intend to further expand our efforts to build monocular patient databases and thereby further expand our portfolio of next generation drug discovery programs through strategic pharma partnerships.
So we're looking ahead of a another fantastic year for you, but I can innovate in 2020 and with this.
Handing over back to partner.
Thank you Craig.
CT Thank you Anna.
If you listen to this it becomes obvious.
We are just at the beginning.
Of what we will do to transform the drug discovery and drug development industry.
And when you go to page 33 of this presentation.
One element of.
Of doing this is our operational venture strategy.
It is still young.
But nevertheless, you can see that we are building a well diversified portfolio.
With multiple shots on goal that follow our overall strategy to co own.
Highly interesting and highly potent essence.
When it comes to our strategy. It is not only about science transforming science and keeping.
Our mission.
In the focus of the company. It's also creating a company that does something that is helping our planet to become even more sustainable than it is.
Our company takes action when it comes to ESG, which you'll see on page 34.
Two years ago, we made many promises on ESG.
Please judge us on our actions.
And we are very proud.
That we are delivering our contribution to do the best that we can in this <unk>.
Very important aspect for the planet.
Okay.
If its nature, it's even better.
So if you go to page number 34.
It is great to see that we are improving our ratings when it comes to ESG, but that's just a nice side effect. Most important for US is that we see that more than 4400 people at Evo Tech are.
Our dedicated to science and.
To do the best for the planet It has become part of our DNA to sink sustainable.
When it comes to the future of the company.
You will see and this is just highlighted on page number 35.
We have started strong into 2022.
So be prepared that our news flow has just started and will continue.
Because when you go to page 36 of this presentation.
You will see that we are setting the pace towards achieving our action plan 25 long term goals.
This will result in multiple.
New partnerships coming from our R&D efficiency platforms.
This will result in leveraging our precision medicine platforms into even more co owned transactions that you have seen.
Ultimately building the largest royalty reporting industry.
And this will result in an unparalleled technological breakthrough that just <unk> biologics will deliver by showing that fully continuous manufacturing in biologics is transforming.
Costs and impact in this important modality.
And if you go to page number 37 of this presentation.
Let me highlight again.
Our weight from a great strategy to an even better strategies called action plan 2025, which is just at the beginning where you will see revenues above $1 billion in 25, where you will see adjusted EBITDA above 325, and where you will see us even.
Investing more into and partnered R&D on a year by year basis and.
And you will see our royalty proved with more than 250 projects coming together that then will deliver next to service income Madison income also royalty income into the future.
Let me close on page number 38.
Thinking U.
That it has been always a pleasure to build this company with the team inside.
But it's an even bigger pleasure.
To build this also with you as our network outside of the company.
It is fantastic how you give input and feedback to this company. Let me. Thank you for this and with this hand back to you for your questions.
Yeah.
Ladies and gentlemen, if you have a question for speakers. Please star one on your telephone keypad now turn to the Q. Once your name has been announced you can ask a question.
Find your question is answered before did you anticipate you can die Orient you to come to your question is yes.
Using speaker equipment today, please lasantha before making your selection amendment. Please for the first question.
And the first question is from James Quigley Morgan Stanley . Your line is now open.
Yes.
Thanks for taking the questions.
Three please.
First of all.
<unk>.
And frankly, the guidance on EBITDA with limited.
But.
Can you give us a.
We view the trajectory.
Midterm targets.
So what we should expect.
The margin obviously the focus is on investing for growth.
How should we think about the trajectory.
Forward hiring.
Hiring those people.
Hum.
The ramp up in Cogs as well.
Should we expect sort of a short term margin hit.
They are sort of more of a hockey stick in the background.
Target.
And then secondly, you mentioned that momentum coming into this year and the revenue guidance was particularly strong.
Let's now review all of the order book.
Yes.
The new partnership activities that you had.
With regard to the year.
Any sort of commentary on how to improve it.
With reopening from from private as well.
That'd be great. Thank you.
Thank you so much.
First of all when it comes to margins on the overall EBITDA you should always see that is strongly milestone driven.
And milestones will be volatile will be volatile from quarter to quarter. So therefore, please look at this in the long run and in the long run with a larger portfolio of milestones coming in margins also go up Nevertheless.
See in short term.
Margins being strong.
And going forward, becoming even stronger so that we can see that for example price increases that we get on our supply chain can largely digest not all of it but largely digest.
And.
Number of transactions that are milestone bearing has gone up in the last years.
There is a larger portfolio potentially coming.
Overall margins will be stable.
In the short run.
Strong positive is good.
And on the second question.
I think one of the most beautiful aspect of.
'twenty one.
Beginning of 'twenty, two is that our expansion and a strong order book, especially comes from <unk>.
Our network of partners, who are going.
With us along the value chain.
So it's less but of course also driven by new partners coming to our platform.
But most importantly, we see partners once they have started to work.
Really continue to stay on the platform. We're meeting with many of our early discovery part has now continued to use the office development.
And of course, if this cross selling effect is going forward you would see less.
Costs that we have for business development less cost that we have to invest in innovating new partners. Because we are going along the value chain, which of course is very good for us in cost with generating better margins, but that's one aspect of the stronger order of the very strong order book that we see.
Coming to cover it.
Covet has for us.
Two aspects one of causes an internal negative effect because.
Sales, our our own workforce of 4400 people.
Also hit by Covid, Therefore, we see significant cost acquired through debt, but.
But of course, it's largely compensated by the fact that many people are working since COVID-19 , even more intensity with evo because our platforms have ever closed and have always delivered.
And I think that's a key transfer transformational step for the whole industry.
Now once the industry is asking themselves how should be good.
Network in the future.
This is like <unk> is the key to all.
At innovation places we've been.
Central.
And we are becoming already for many of our pharma partners are virtual biotech partners and our mission driven foundations.
I hope that answers your questions and with this we go to the next question.
Yeah.
The next question is from Joseph Joseph Hedden Rx Securities. Your line is now open.
Good afternoon, and thanks for taking my questions I've got two firstly could you. Please tell us how much was invested in evo equity in 2021.
Whether we can expect a similar level in 'twenty two.
And second question.
Just even take politics growth I appreciate the DJ ports.
It's already been online since November , but how much of that 75% growth could we attribute to.
The J code activities.
King.
Greg first question goes to enter second question goes to Craig.
Yes on the <unk>.
First question is relatively easy we were close to $22 million that we invested into.
Into equity.
In 'twenty, one 'twenty, one and we don't give ourselves a guidance for 'twenty two because we look on equity opportunities on a case by case basis.
But we see a strong pipeline of potential engagements for this year and also don't forget one of the reasons for our NASDAQ listing and one of the use of proceeds in our NASDAQ listing was also too we had the cases right to also continue these operational synergistic investments second Craig.
<unk> goes to.
Yeah.
Yes. Thanks.
So.
The <unk> coming online you are absolutely right.
Yeah.
In November that did indeed attract some revenue, which we're very pleased to recognize in November and December but actually in terms of the quarter four performance the main contribution to the.
Due to the increase in cost for performance and particularly the.
The uptake overall was.
Particularly due to milestones and other elements of the base business growth in quarter, four we had a strong quarter four and other other.
Aspects of the base business.
Tremendous milestone contributions in that quarter.
Okay.
I was just.
Sorry, just to just to follow on from that I was wondering if you could give any any kind of guide as to your expectations for the contribution suggested in 'twenty two.
Okay.
Correct, yes.
Yes so.
We don't usually breakout.
Just even take biologics in terms of revenue and contribution but nevertheless, the two trains are well occupied the too fast trains are well occupied during the course of this year.
And will contribute.
A substantial increase in the Josh revenues over 2021 because of additional capacity as well as process development expansion, which of course feeds liter manufacturing runs.
Further years down the track. So we are we're looking forward to just give or take biologics growing again in percentage terms.
Into double digit from 2021 into 2022.
And double digit here on just Evo Tech biologics growth doesn't mean 10 doesn't mean 20 means significantly more than 30.
Percent growth that we're expecting here just to give you here a bit of color.
Okay. That's very helpful. Thanks very much.
The next question is from childhood frankly Deutsche Bank. Your line is now open.
Thank you very much good afternoon, everyone I have three questions. Please the first one is on the.
The funding environment for biotech, there's obviously a lot of discussion out there.
People are concerned about a potential slowdown in funding. So I was wondering what you are seeing from your business perspective.
In that regard then my second question.
There was plenty of news flow about your partnership with BMS over the last few months.
Some of these are news items came with pretty substantial payments to your company. So I was just wondering if you can summarize for us where we stand now with that partnership and what kind of news flow we can expect.
During this year.
And then my third question is on your pretty impressive cash balance.
Do you plan to utilize that over the next 12 to 24 months and.
What is sort of a level that you would always like to keep.
To keep on hand, essentially essentially thank you.
Yeah.
So the second question on BMS will go to court in the second the third question on cash.
Which hopefully keeping the bank cannot.
And we'll go to Endo.
And the first question if you allow me I'll comment a bit so so far in 2022, we don't see on our order books and impact of the slower funding environment that of course, we also see.
Especially in the U S NASDAQ markets because in Europe , it's compared to NASDAQ and to public markets in the U S not not that relevant.
Having said that don't forget that many of the companies are still very well funded.
In the U S environment and also don't forget the typically the impact that we see of these companies cooperating with US is between two to three years after their funding.
Has happened that we see substantial.
Topline and bottom line impact of these companies on our on our situations. So that's why.
The slowdown of the funding environment for example, within gene therapy companies in the U S. At this stage.
Is something which we of course see but doesn't operationally.
US too much at this stage.
And we also think that the second half of 2022 should be an uptick in the funding environment again, so thats I think by so far that's not any reason for us to be concerned. The second element you should see here is that the slowdown of private funding.
Has been also partly compensated by significantly more public funding into the biotech industry and also by more public organizations cooperating with platforms like <unk>. So just if you look at the whole pandemic preparedness.
Business that we have gained that's a very nice compensation for us with some of the public.
Some of the private elements that have fallen away and the third element of course is obvious here that we have a very well balanced portfolio of partners not only biotechs, but of course also pharma partners and mission, driven foundations and academic institutions, and especially with mission driven foundations, we don't see it.
Any slowdown.
At this stage when it comes to the partnerships that we are having with them.
So long answer for a short question. It is concerning in the midterm if funding.
Environment doesn't increase in the short term for us it's not concerning.
With this I hand over to court on the BMS overall picture.
Yes, happy to keep it a little bit.
Overview here, so with BMS, we have multiple highly protective partnerships in particular of course.
What we call the Dms neuro collaboration.
And also a.
Uh huh.
Our second collaboration in the area of targeted protein degradation in particular.
Beyond that additional partnerships that are also in the field of targeted protein degradation.
But still at an early stage of essentially.
You had seen last year.
The Dms the BMS collaboration has delivered.
Quite a number of very substantial milestones based on these milestones we have added.
Additional programs into portfolio.
We have to see.
Quite a number of additional opportunities here for 2022 as well.
And of course.
Yes.
Matson given achievements always based on data that has to be generated and achieved.
Can't make any predictions here, but overall I would say the pipeline is well filled here for additional milestones in 2022.
The BMS collaboration.
The pms.
Targeted protein degradation.
Collaboration that only started three years ago.
We are very excited about it.
It's been a.
Highly productive partnership.
First milestone for actually.
Chief.
Last year and the year before that.
But here, we do see an opportunity to even accelerate.
The initiation of key projects and lead stages with lead optimization stages filling in the pipeline even further.
So overall, we see probably as many if not more opportunities here in the future.
Targeted protein degradation collaboration.
In the BMS, new collaboration and then the earlier stage Copa collaborations that I don't want to go into detail because there is to it.
Quite early stages, but we also see opportunities to add to this mix essentially.
So.
So essentially.
The overall view is quite positive.
For 2022, but even beyond that.
Thank you so much with this we go to the cash question <unk>, yes.
Having you on the call cycle, so to the cash position.
Principal I would like to make one reference first.
As to our S. One prospectus from last year, where we had a detailed breakdown of our investment activities in the context of our use of proceeds that is still valid and principal. So if you want to look into the details.
In general it is about investing into acceleration of our business and investment of our facilities and sites in particular further ramping up and potentially expanding the capacity of our J put one in the U S. As we spoke about additional trains in the past the biggest ticket will definitely go into our second jackpot builder.
Starting to build in the second half of this year, but also.
Scaling our existing R&D platforms that we are driving forward.
We'll take some of the investments.
General capacity and facility expansions as we have to bring all the people to work and into the labs lab equipment. That's another big building block and last but not least we were referring to before is our equity engagement in terms of our equity.
Activities, where we will continue to invest.
To the question what is our lowest threshold so to say technically our threshold is very low so from a covenant perspective, it's in the low to mid single double digit million euros. So that is not a serious topic.
And then internal calculation we have.
The way that we say it should be.
At least above $250 million as a reserve.
Don't forget this isn't positive operational cash flow driven company. That's why this number is not that relevant for us and maybe if I may add one comment here.
I work for you protect now for more than 12 years. It has never been a time, we're investing in our internal platforms out of our cash.
Has been so rewarding into the future as it is right now. So that's also why you will not see major spend of our cash balance as you see it today into external acquisitions, because we really see that there's a lot to be gained by investing on our own platform.
<unk>.
And then any wells and if we never exclude also here of course external acquisitions and we will also look at many of these things, but the threshold is very high.
Okay. Thanks, a lot that's okay for you we would go to the next question.
Hi, Jeff.
The next question is from Aegon Kian Barron Your line is now open.
Yes, Hi, this is eager from Bloomberg Ive got a couple of questions from my side I think you mentioned that the energy at present.
Cost is one of the factors that could impact your margin, but they.
Do you also see the cost inflation on other fronts or maybe.
Wage inflation is more relevant for you and if yes is it possible to kind of quantify how does it look year over year so far.
In terms of wage inflation.
In general how much of this let's say cost inflation in energy prices impact is factored in in your in your EBITDA guidance our margin guidance.
Second question on Capex, how much of that do you expect for the current year given that you plan to start in the second half of the year second chipotle into lose them.
Thank you.
Yes, So first question on <unk>.
Energy cost and cost inflation goes to endo.
And on Capex also China.
So I have it all thank you very much and I'll start with the Capex van I already mentioned that it could be in the range of up to 300 million euros.
For the year 2022 in total that is probably the very upper end of our expectations.
Things will depend on the progress of the construction in particular as I said before of our J part two in Europe . So it could also be that it comes out at the end of 250 year, but thats a realistic range that we're looking at from today's perspective on the energy cost. We have assumed currently roughly increase of 30.
Percent and our current budget.
Cost increase.
For energy gas electricity and so on.
And we will have to monitor whether this will be sufficient.
Things develop continues with its something that we are clearly having on our radar, but that is the base.
From what we have expected of course, there are other parts.
That also influencing the cost influencing the cost development over time, and you were referencing to salaries and wages, which is clearly increasing on average.
And also here we are monitoring this so far our measures internally have been pretty much in line with what we have to be doing in the past years, which was always 3% to 4% increase per year, but obviously, we have to make sure that we stand within the market competitive bandwidth and therefore this needs close.
Monitoring as well, but that's what we have in the budget currently for 2022.
Okay. Thank you thanks.
Casualty eager.
With this we hand back to next question.
The next question is from Michael Richardson and Bank of America. Your line is now open.
Great. Thanks.
Try to be quite given the time.
First I want to follow up on some of the questions you've already touched on regarding reinvestment back in the business.
Could you give a little bit more detail on what particular technologies or platforms are really prioritizing I mean, you've been focusing on on partnered R&D for a number of years, but it's still a pretty sizable step up this year. So if you could just provide more color on where are you seeing the best opportunities.
For that incremental spend youre going to make in 2022, and then sort of following up on that.
Still targeting about $100 million.
In 2025, so is this more of a.
One time step up I guess I would say that the incremental growth in the next couple of years ago seems to be a little bit slower.
Just walk us through the timing for that and why this year is the right time to make that investment.
So the first answer is I think very clear.
That we are building platforms, which are.
Driving probabilities of success up.
This massive investment goes for example into all mixed based technologies for drug discovery.
And the future of drug discovery, which will be omics based can only be handled if you have platforms that have the right Omics driven data collection, but also the right data analysis tools at hand in that fourth quarter was referring to when he said PON Hunter as for example, an essential tool on our.
Panamax platform.
Clearly one priority that we want to fully invest in and be very quick in doing this.
Second is everything which is probabilities of success when it comes to molecular patient derived data.
And with this building out our molecular patient databases as starting points for drug discovery and drug development is a massive long term effort, which will also gradually go up over time, but we are making really some step functions of investments this year.
For example, <unk>.
After building up our kidney disease molecular patient database, we have been starting to build up massively our liver.
Driven.
Patient database, our neuro molecular patient database, our ini in immunology database is as we speak fully up to speed that people not gain here. So these are investments that we're making in this area and the third one to mention here is organic growth and <unk>.
<unk> on induced pluripotent stem cell platform and cell therapy platforms. When it comes to drug discovery, but also to cell therapy, where we are really going a step change forward from what we're doing now why because induced pluripotent stem cells is driving probabilities of success up and cell therapy.
S right modality for certain indications like we do this in oncology for example, but also with our Q a beta project in beta cells is absolutely key in on strategy for us and Thats why we continue to invest into these platforms and technologies and that just gives you a selection of the mix quite organic invest.
<unk> is absolutely right.
At this stage in Egypt translated to your question on the $100 million and 25.
That's really.
Something.
I would say we have modeled this out but we will monitor this on a year by year basis, and say what is the right return on investment number that we want to put forward here. So I think the.
The slow growth of that number compared to compared to the other numbers should just show you will probably be that it is hard in drug discovery and drug development simply because most of the investments go here into top qualified people to.
To build more than the number of people that are behind that number.
On on the speed, where we would like to build that if there are opportunities for example to accelerate R&D investments with ultimate duration or other towards that number could be higher when it comes to the growth of people behind the number it's probably not easy to exceed that number.
Okay, great. Thank you.
Yes.
Yes, if I could squeeze in a quick follow up.
On the 105 to 120, adjusted EBITDA guidance I want to make sure I heard you correctly, you mentioned in the prepared remarks sort of how some of the milestones and upfront payments, obviously worked through a really really healthy margin if I could.
Big role did you did you indicate that that one five to 120 already assumes a healthy amount of that upfront payments milestones or is that upside from from those levels and make sure I got that correctly.
It's just to bring you into the process here at the beginning of every year, we look at the at the potential achievable pool of milestones.
We then risk adjust this potential achievable pool of milestones.
And for example, if the end a medicine like <unk>, we expected phase III Madsen drops out its digital drop out of the milestone.
And that's been always corrected and updated to the latest stage number.
I think what you see here is.
A good year expected on milestones, but not an exceptional year expected on milestones from our risk adjusted view of the potential achievable milestones that we see so yes, there is outperformance potential on that number.
If it would be just for example, a full portfolio of milestones that really hit and that come but that's been typically happening sometime in the middle of the year or in the second half of the year also to guide you on this one.
Great. Thank you.
Next question please.
Question in line is from Jared <unk> RBC capital markets. Your line is now open.
Hi, Thank you for taking my question.
One last for me and I think we're understanding beckman in R&D in order to expand further.
Further the topline growth. So I'm wondering if you can provide more color on how you see that.
Longer term growth.
On the innovate Beckman and are there any near can lead indicators that you can track.
What gives you confidence that the actions planned for.
Fine will be achievable.
For example, any particular number of partnerships that you wanted one this year.
When you take that yes, we would be very helpful.
Yes, great question and of course <unk>.
Everything that we do is following controllable kpis and if you look at for example, the Kpis on growth of innovate over the last eight years, you will see every single kpis not only achieved but even outperformed and that makes us very confident that the law.
Long term.
So to say first investing and then harvesting back these investments on our innovate portfolio is the right way to go especially.
Once these partnerships mature and come into higher milestone bearing and royalty bearing.
Situations. That's why you have to think long and not short.
Why because if you look at the for example.
200 milestones behind every individual projects in our for example, BMS alliance or J&J airlines or in <unk>.
Lilly Alliance then the milestones that we are generating are increasing in size over time.
And of course royalties.
Typically attached to product sales that that's why they come later so.
Thats Kpis that we monitor and debts kpis that make us very comfortable that this is on the right track not only when it comes to innovate investment. It also comes to the right.
<unk> when it comes to our base business.
Investments if you Trust for example, followed here our investments into safety prediction.
And if you look at the growth of that business and the margin expansion of this business and you also see here the right trajectory or if you look at our development business.
Then you see that our co owned pipeline is one part of feeding this development business and with this cross selling as a key kpis that we are following is driving our business and the flow of our business. So we could expand this here for a long time, but I think the short answer is yes. Many kpis.
Point in the right direction.
Thank you.
Pleasure.
With this thank you.
You for staying a bit longer than usual hour today, but it was our.
I think update which is important for the start of the year and if you have any further questions don't hesitate to reach out to our IR team. We have <unk> is heavily answering your questions and with this let me. Thank our team. Let me also thank our team who put together the full.
Year end results and put all the effort into making this a complete version of a fantastic report that we can give to you you can imagine how much work. This is in year number one after starting a NASDAQ listing.
It was a great effort from the team and with this big Thank you to the team and also to the whole company and to you as our external partners. Thank you. So much have a great day.
Ladies and gentlemen, thank you for your attendance. This call has thinking clearly you may disconnect.
[music].
Yeah.