Preliminary Q4 2022 Evotec SE Earnings Call
Speaker 2: Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the Evotech SE preliminary figures full year 2022 call. Throughout today's recorded presentation, all participants will be in a listen-all mode. The presentation will be followed by a question and answer session.
Speaker 2: If you would like to ask a question, you may press star followed by one on your touch tone telephone. Please press the star key followed by zero for operator assistance.
Speaker 2: I would now like to turn the conference over to Dr. Lerna Lantana, CEO . Please go ahead.
Speaker 2: Thank you very much. Welcome from Sunny Hamburg to all listeners.
Speaker 2: And let me first.
Speaker 2: remind you that we have uploaded a presentation for this call, which you can find on the internet, and we have called it Ahead of the Curve Leadership in our Focus Areas for Meditins that Matter.
Speaker 2: This brings me directly into how we wanted to start this discussion with you today.
Speaker 2: because it is amazing to see what we have achieved in 2022. And let me start by thanking the whole company who is working every day to find new medicines that matter.
Speaker 2: Let me also thank you, my closest team. It's a big pleasure and a great satisfaction to go forward with you also in a year like 2022, which overall was quite challenging, but nevertheless we have achieved a lot.
Speaker 2: And as you have seen, in an environment where many things
Speaker 2: came unexpected. We have done the right thing and have kept our
Speaker 2: traction in being ahead of the curve.
Speaker 2: Looking at my team, I want to wholeheartedly say thank you to Enno. It has been a great pleasure to work with you for such a long time, and I'm very, very certain that our path will cross again in the near future.
Speaker 2: Let me at the same time and with this guide you to page number 4 introduce Letitia to you. Letitia will join us as of April and has started her onboarding process but will go fully into Evotech as of April and then you will for the first time see
Speaker 2: and hear Leticia at our Q1 presentation.
Speaker 2: When we come to a reflection of 2022, let me guide you to page number 6.
Speaker 2: It is important to see what we are doing in the context of the convergence.
Speaker 2: of technologies that is going faster than ever before.
Speaker 2: And when we say convergence of technologies, it has only one goal for us, to understand diseases better than ever before and with this generate better starting point.
Speaker 2: We have pointed out here a few selected industry mega trends and you have heard about all of them.
Speaker 2: But what we want to point out is that in many of these megatrends, Evotech is truly ahead of the curve by, for example, applying AI and ML-based discovery methods, or by using all mix.
Speaker 2: as a key tool for precision medicine of the future.
Speaker 2: And of course, when you think back only one decade, where Evotech started with an IPC platform, then you have seen how often we have seen mega trends coming, and where they have put the company ahead of the curve to achieve significant results.
Speaker 2: which will result from medicines that matter very soon. On that note, let me guide you a bit into the highlights.
Speaker 2: of 2022, but also not neglect that it was a challenging year where we also saw some no life
Speaker 2: On the highlights, it is significant progress that we can show in our partnerships throughout the industry network, especially also with BMS. We have made the largest targeted protein degradation alliance in the industry and importantly, you should see this is an eight year alliance.
Speaker 2: on our IPC.
Speaker 2: BetaCell replacement therapy alliance, we are also making great progress towards a functional cure for diabetics.
Speaker 2: When you look at our multiple partnerships in many disease areas, progress is made on many fronts.
Speaker 2: On Just Deportect Biologics, we are laying the foundation for strong growth in 23.
Speaker 2: And by building J-POD number 2 in Toulouse, we also are fully according to our plans on our way. We have made some smaller but very important acquisitions in 2022. And I want to highlight here how important our Evotec Moderna is.
Speaker 2: clinical and commercial manufacturing platform for small molecules, for cell therapies and our small molecule acquisition in Halle Evotec DS.
Speaker 2: The progress on our data driven precision medicine platform is huge.
Speaker 2: And launching Panhunter is just one act that shows you how far we are ahead of the curve here because generating the
Speaker 2: key data analytics.
Speaker 2: tool in the industry which was one of the triggers for many of our transactions that you have seen in the past and many more to come is just a highlight here.
Speaker 2: Many of the diseases in the future will only be treated if we understand the molecular core. So creating molecular databases, what we call EMPD, is a key highlight that we have started in 2022 on a quite aggressive path and we will continue this into 2023.
Speaker 2: The endorsement of the European Investment Bank to give us a second time a large loan should also not be neglected. It also was reported after the period ended. On the low lights, it's very small, the number here, and we of course have to highlight that buzzing sound.
Speaker 2: that this continuation of our P3 program as one of our portfolio assets in women's health was something that we didn't like, didn't expect, but we have clearly already digested in our operations.
Speaker 2: When it comes to increased costs from energy and materials, this is nothing that was in our control, but of course on the operations we suffered quite significantly from this effect in the first half of 2022, and we have corrected here many situations in the second half of 2022, which also led to a much better.
Speaker 2: Q4 as you have seen and took a good start into Q23. And the slightly slower anticipated ramp up of J-POD in the US should not worry anyone because we feel fully on track with this operation.
Speaker 2: When it comes to...
Speaker 2: our page number 8, you should see that this was an amazing year also when it comes to our growth profile and also our profitability profile.
Speaker 2: because this was the 13th year of continued double digit growth and we feel this is a great achievement because the external influences were clearly not all in our favor. And it also feels great to already now be able to say that there will be a 14th year coming.
Speaker 2: The page number nine shows you our initial...
Speaker 2: guidance for 2023.
Speaker 2: where you see that we clearly are committed to grow steeper on our bottom line than on our top line and those will be double digit growth figures.
Speaker 2: Nevertheless, we are not compromising on our R&D commitment, which will be still in the range of 70 to 80 million, which is where we see our projects getting started and then rolled over into strategic partnerships also in the future.
Speaker 2: Many people ask us how does this fit into your Action Plan 2025?
Speaker 2: Here, never forget that J-POPs will only show their initial contribution to our top line and bottom line by the end of 23, beginning of 24, and where J-POP number 2 will go online by the end of 24, beginning of 25.
Speaker 2: So that's why there will be a step function coming into our top and bottom line with this contribution where the negative contributions will be gone and you will also see a step function in many of our milestone bearing collaborations into the year 2024-25.
Speaker 2: With this, Action Plan 2025 is fully on track.
Speaker 2: And if you look at Evotech, do not only look at the short-term numbers because the royalty pool that we are building into the future and the massive milestone pool that we are building into the future is growing every day.
Speaker 2: It's of course a great pleasure that today another 4 billion in milestone potential was added and another royalty cascade of a huge portfolio that we're building was added by the today announced CNS collaboration together with our long-term partners BMS here.
Speaker 2: If you continue in this presentation, let me guide you a bit deeper into our focus areas. Building a company that is ahead of the curve nevertheless means that we want to stay and will stay very focused on where we can win.
Speaker 2: We have defined four areas where we can win in the global competition in building a leading company.
Speaker 2: The first area is what we call panomics.
Speaker 2: Panomics stands for deep disease understanding for effective therapies.
Speaker 2: The second area are IPC-based cell therapies.
Speaker 2: where we create off-the-shelf cell therapies based on induced pluripotent stem cells, which ultimately will be not only manufacturable, but also affordable cell therapies for wide groups out there that need cell therapies.
Speaker 2: Just Evotech Biologics is a start into creating access for many more patients with more precise antibodies and biologics than ever before.
Speaker 2: And our end-to-end shared R&D platform is representing the shared economy of research and development for all technologies and tools that partners in the industry need.
Speaker 2: Pinch number 14 illustrates you this.
Speaker 2: portfolio of our offering even nicer. If you go to page number 17...
Speaker 2: and we are diving into the first focus area, you see that Pannonix is already a success now and it's just starting.
Speaker 2: The future of omics is beginning now.
Speaker 2: And when you look back in a few years, you will call this an iPhone moment in drug discovery and drug development when we started to really go to transcriptomics and omics level to understand diseases better than ever before.
Speaker 2: It's great to see the endorsement of many partners, but it's even more exciting to see that with this, better drugs will be made very soon.
Speaker 2: An enormous endorsement when it comes to omics was the first transaction in targeted product degradation that we did and that was then expanded through BMS.
Speaker 2: and us.
Speaker 2: last year.
Speaker 2: In the noise of the biotech environment when it comes to funding or when it comes to other things, it was often not clearly heard how big the disruption potential is of this transaction because here we are finding more and more drug targets than probably anyone else in the industry at this stage.
Speaker 2: and we are degrading.
Speaker 2: more parts of the largest and most productive library than anyone has ever done.
Speaker 2: So the efforts here are enormous and the upside and reward for Evotech with a more than $5 billion deal and double digit royalties is also enormous.
Speaker 2: If you go forward, you see, and we have announced this today in the morning, and that's also the reason my court is not here, because he is just finalizing work plans of our expanded and extended neurodegeneration platform.
Speaker 2: You see how important it is for us to land and expand with our strategic partners because that's the best testament that any company can get. Creating a partnership for the next eight years and with this creating a second alliance that goes into the 2030s.
Speaker 2: which we have done with targeted protein degradation and which we have done today with neurodegeneration, shows you the full commitment of two partners to build a portfolio which will be world leading.
Speaker 2: Eight years of full commitment, eight years of efficient teams, eight years of the best platform will generate also neurodegeneration and absolutely needed mobile pipeline of products.
Speaker 2: Page number 19 shows you that great deals come from great people and it is absolutely appropriate to thank Kord, especially on this one. And it's also appropriate to thank Richard Hargreaves on BNS side, especially on this one because
Speaker 2: It's their scientific vision now coming into product stages very soon.
Speaker 2: Why is this so important? You see this on page number 20.
Speaker 2: because we all, as we are listening into this call, should see that the burden of neurodegenerative diseases is increasing with age.
Speaker 2: We will get very old, but we want to get old and be healthy.
Speaker 2: And with this, creating here novel interventions for neurodegenerative diseases is absolutely needed because you know that the pipelines are empty or are only very, very symptomatic and not effective treatments.
Speaker 2: When it comes to the how are we doing this on page 21, you should see that our industrialized IPC platform is in the heart of these efforts. And this is combined with our molecular patient databases and then creating
Speaker 2: completely novel drug targets where we can predict much faster than anyone else which targets will have higher probabilities of success if we bring them forward because they are human derived and not like in the past. Most of these drug targets were only tested and derived from animal data. If you put this in context on page 22
Speaker 2: to build this franchise even broader in the future. And when I say broader, we want to also go outside of neurodegenerative diseases here with our IPC platforms and our molecular patient databases.
Speaker 2: If you switch to the next focus area, I can see derived.
Speaker 2: I think we should all appreciate that this is the beginning.
Speaker 2: of iPSC derived therapies that are affordable and that can be widely used.
Speaker 2: This has been so far really the bottleneck in the industry. And with this, we also are expecting here quite a big renaissance in the next years to come for cell therapies, especially when we can create off-the-shelf therapies that will be manufacturable and affordable.
Speaker 2: talking about manufacturability.
Speaker 2: The product is the process when it comes to biologics like this. And with this the piece of the puzzle that we have added with our modernist facility.
Speaker 2: to being able and create here manufacturing processes that follow the biology.
Speaker 2: We are absolutely leading the industry when it comes to an end-to-end solution for IPSC.
Speaker 2: On IPSC and on SalesRFP on page 26, you see that we are building a comprehensive portfolio where our partnering efforts have just started. So you can expect much more efforts in our partnering world.
Speaker 2: to come and now with having a biology understanding into a manufacturing solution, you can imagine how well received this offering is in industry and Janssen is of course one partner that we are very proud of in this context.
Speaker 2: Coming to just Evotec Biologics, I think we have made it very clear that we are fully behind this effort.
Speaker 2: More so than ever today. Why? Because access to biologics is needed and will be even more needed with the many biologics to come in the future.
Speaker 2: more so than ever today. Why? Because access to biologics is needed and will be even more needed with the many biologics to come in the future. And therefore, we are...
Speaker 2: feeling quite comfortable at this stage that we will meet and maybe overachieve our close sales guidance that we have given ourselves for the end of 2022, where we said we want to be above 100 million. We are in multiple discussions at this stage with public input.
Speaker 2: with innovative biotechs, with pharma companies, also with similar companies, and we expect here our portfolio of partners to grow quite nicely in the near future.
Speaker 2: This is important because on page 30 you see that our cut expense, which has to be before bringing customers into our Jpods.
Speaker 2: He is of course ramping up, but it was always clear to us that this will be a startup phase which will be volatile and which we will then see coming to the market by the end of 23, 24, 25 quite substantially. Our last focus area is our end-to-end shared R&D platform.
Speaker 2: Let me convince you here only by numbers on page 32. Having more than 800 partners on our platform at every moment in time is justifying when we say that we are the basis for the shared economy in R&D.
Speaker 2: Even increasing our repeat business from about 90% to 92% in 2022 shows you that customer satisfaction is what matters in your take.
Speaker 2: And showing you also that we are creating an even larger number of partners where we are going deeper with more than one billion in revenues is giving us a very good portfolio effect in many regards.
Speaker 2: Page 33 shows you that we believe in this mega trend.
Speaker 2: And we are leading this mega trend with a high quality growth if you look at the global market for a variety of costs. Let me comment here for a second on the biotech funding crisis. Many biotech funding situations are today really driven by the fact that biotech companies understand that they are better off in working with Evotech on the basis of a variety of
Speaker 2: this will be your last presentation in this context. But again, it's beautiful to see you presenting the best numbers of Q4 ever.
Speaker 3: Yes, that's my great pleasure. Thank you Werner, presenting record numbers actually regarding Q4 of IWOTEC, which was the strongest performing quarter ever in the 30 years history of IWOTEC. Welcome everybody to the call, also from my end. It's a great pleasure and I'm very pleased to report our financial performance for the first 12 months period.
Speaker 3: ending in 2022. Let me start on page 35 with a brief overview of our preliminary numbers before I break down into more details on the following slides. Prior to the previous year, the group revenue increased by a strong 22%.
Speaker 3: to 751.4 million euros, surpassing our upper revenue guidance by over 15 million euros.
Speaker 3: and this significant growth was especially driven by our very robust base business. Variable FX efforts provided additional tailwinds, adding 40.6 million euros to the revenue line of Fabotec. On the other side, we did see a decrease in milestone revenues of...
Speaker 3: compared to the previous year. And this decrease was mainly due to the increasing cost of just eBOTec Biologics manufacturing and the lower contribution of milestone revenue was just a new ticket.
Speaker 3: Additionally, inflated energy prices, more expensive materials, and increased logistics costs had a negative impact on the gross margin as well as Adana already mentioned.
Speaker 3: Additionally, inflated energy prices, more expensive materials, and increased logistics costs had a negative impact on the gross margin as well as Adana already mentioned.
Speaker 3: I'm caught on R&D increase by 21% from 58.1 billion in the previous year up to 17.2 million in 2022.
Speaker 3: This is again a testament of our commitment of investing in EOTech's capabilities to improve our efficiency and precision medicine platforms.
Speaker 3: That said, compared to our guidance target, the result of the unpartnered R&D costs is still at the lower end of our guided range of 17-18 million euros. Regarding our ambitious EBITDA guidance, which was set between 5 million and 120 million, we report a like for like adjusted EBITDA.
Speaker 3: of 104.1 million euros. This result was driven by a well-balanced development between our favorable growth and expansion versus profitability of Evotex-based business. However, significant investments to further increase the high potential of Evotex just J-Pod.
Speaker 3: had a negative impact on the EBITDA outcome, as well as a lower milestone contribution pointing to the same direction. In addition, strong headwinds from an inflation perspective were a challenge to our EBITDA, particularly in the first half of 2022.
Speaker 3: Eliminating the expenses which appeared in context of our M&A activities and the IBITDA contribution from our latest additions, namely IWOTEC Moderna and IWOTEC DS in Halle, Germany, which totaled to $2.5 million, the M&A adjusted IBITDA like-for-like improves from $1.5 million to $2.5 million.
Speaker 3: projects would lead to an outstanding EBITDA residing into an EBITDA of 138.3 million euros for the full year 2022.
Speaker 3: Looking at page 36, this slide depicts our excellent revenue growth of 22%, which was spread across the majority of our business units. Thereof, 15% resulted from a joint organic growth of our group revenue at constant FX.
Speaker 3: Consequently, an important factor in the achieved revenue growth were FX tailwinds of roughly 6.6 percentage points and adjusted for just jpot related group revenue stand alone grew by 24%. Just looking at the base revenues.
Speaker 3: These increased by an impressive 30% and once again confirmed the growing demand by our existing and also new partners. While we experienced a decrease of our overall gross margin, the gross margin, excluding just Evotech Biologics, would actually increase from 28.4% to very firm 31.1%.
Speaker 3: therefore exceeding last year's gross margin by 2.7% of points.
Speaker 3: And this also despite reduced modern strong milestone contribution as well as inflation head is like 04. Border
Speaker 3: Considering all these challenging environments and factors, the outcome of this year's 2022 numbers is deemed as highly satisfactory.
Speaker 3: and factors, the outcome of this year's 2022 numbers is deemed as highly satisfactory.
Speaker 3: Looking at page 37, this slide highlights our already anticipated very strong EBITDA outcome for the last quarter of the year.
Speaker 3: In Q4, the Iberda contribution was 57.1 million, which was largely driven by milestones, up-fronts, license and royalties.
Speaker 3: Again, a significant growth factor was the excellent development of our base business, including a very strong operating leverage.
Speaker 3: And last but not least, a very strong quarter of just eOTech biologics also contributed to the outstanding Q4 ABITA.
Speaker 3: Major factors for the positive development were an excelling operating leverage as well as some royalty-related revenues as Werner just indicated earlier as well.
Speaker 3: Adjusting for just eBOTech biologics, we would be looking at a very dynamic growth rate of 34% comparing Q4 2022 versus previous year Q4 in 2021, which was already also a strong quarter.
Speaker 3: just e-rotate biologics, we would be looking at a very dynamic growth rate of 34% comparing Q4 2022 versus previous year Q4 in 2021, which was already also a strong quarter.
Speaker 3: Like the previous slide, page 38 further underlines the exceptional Q4 2022 performance being the strongest quarter in our history as I mentioned before. The revenue growth was 29% compared to an already strong Q4 2021 and this exceptional achievement was supported by the
Speaker 3: by a milestone contribution of 12.3 million euros in that quarter.
Speaker 3: The good loss margin in Q4 increased to 34.4%, being 6.5 percentage points higher than in Q4 2021. The most significant factors shaping this great outcome for Q4 were the achievement of milestones, affluence and licenses, royalties from ESCAR Bioscience, a very prosperous development of the base business.
Speaker 3: and a strong performance improvement of just Evotech biologics in the final quarter of the year.
Speaker 3: Despite massive pressure on the cost side due to inflation and ongoing investments, the EBITDA and Q4 could be improved by 53% overall versus Q4 2021. Eventually, 52% of 2022's EBITDA has been posted in Q4.
Speaker 3: The net result was once again influenced by the volatile share price development of our share holding in Exientia as the main factor driving the net result.
Speaker 3: Moving to page 39.
Speaker 3: This overview slide summarizes the main balance sheet and also cash flow KPIs of 2022 compared once again against 2021.
Speaker 3: Overall, the balance sheet remained roughly stable with a total north of 2.2 billion euros total assets or total balance sheet.
Speaker 3: And with an equity ratio of 52.6%, we remain with a very solid basis for future investments as it provides us with considerable financing flexibility to drive our growth trajectory in case this would be needed.
Speaker 3: It is important to note that the decrease in the equity ratio is primarily attributable to the fair value adjustment of XCNCR shares, which amounted in total to an adjustment of –$175 million in 2022.
Speaker 3: The operating cash flow totaled to 200, 203 million euros, exhibiting more than 80 million increase compared to the prior year. And a significant event was the receipt of the 200 million US dollar payment from BMS in the first half of 2022.
Speaker 3: The net deb ratio of minus 2.0 adjusted EBITDA factor also underlines the solid financing basis and a lot of headroom for financing flexibility is needed.
Speaker 3: Evotech's liquidity position of 719 million euros builds the platform to further pursue our very ambitious growth and investment strategy.
Speaker 3: CAPEX in 2022 amounted to 181.4 million euros and included a significant portion of site expansions. For instance, 58 million have been invested in J-POD Europe or to this precise 50 million in our J-POD US as well as another 86 million to expand our sites in UNIT.
Speaker 3: menus for the exhibition of IWETech Moderna as well as IWETech DS in total.
Speaker 3: And with this, this completes my financial overview and therefore I will hand back to Dana. But before I do so, I would like to in particular today here on this call thank the audience, so our investors, our shareholders, our analysts and the media who accompanied us over the past years and where it was always a great pleasure.
Speaker 3: interacting with you and being in touch with you. And I hope we can continue to do so maybe one time. Let's see.
Speaker 3: Thank you very much for your trust and for the interaction and communication we had. I'm handing over to Leticia from next week onwards, and I'm very grateful having had a great experience over the past almost seven years being on this tremendous journey with Evertac together with my team, with my colleagues, and also obviously the management. It was a great pleasure, and therefore, thank you a lot for having this opportunity. Thank you, Enel.
Speaker 2: Let's come to the final part of this presentation by first on page 41, iterating our action plan 2025 as always stated.
Speaker 2: If you go to page 42, you see that it is essential to build a growth company with a growth culture.
Speaker 2: And with this bringing at this stage about 500 new talents into the company in 23, we are also committed to not only build the culture, but also build the prospect for these new talents to come to stay and be motivated to see a long-term future.
Speaker 2: within ebotank.
Speaker 2: And if you go forward on page 43, it is increasingly noted also by the outside that the
Speaker 2: that we keep our promise when we talk about ESG and sustainability. We want to make our contribution not only to patients but to the whole planet.
Speaker 2: Everyone can start here, everyone can contribute here, and we want all our employees in the outside world to realize that we take this as a very, very strong commitment from the whole management team into the whole organization. So you see listed here our contributions to environment, and also our central contributions and also...
Speaker 2: our commitment to best of all governance.
Speaker 2: If you go to the next page, you also see our promise will continue and accelerate when it comes to ESG goals in 23.
Speaker 2: Why is this important? Because we want to have here a full understanding for growth. And with this, we also want to have, for example, a full understanding of our talents everywhere where Evotech is working with, for example, highlighting here the interaction through an engagement survey in 23.
Speaker 2: When it comes to our news flow in 23, and if you go to page 45, it's great to see already some ticks made despite the fact that it feels like the year has just started.
Speaker 2: So you can expect a lot from us when it comes to panomics, our first focus area, when it comes to IPSCs, our second focus area, when it comes to just deprotectile objects, our third focus area, and when it comes to our end-to-end shared R&D platform, our fourth focus area. We are just beginning when it comes to the year.
Speaker 2: but we are just also beginning when it comes to the long-term vision of Ego Tech. And with this, on page 46, let me thank you for following us. Let me thank you for all the questions that we hope to receive. And I'm here together with Mathias and Craig and Eno and the whole team to answer your questions.
Speaker 2: you are hopefully pushing the button now. Thank you so much. Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question, make a star followed by one on their touch-tone telephone.
Speaker 3: If you wish to remove yourself from the question queue, you may press star followed by 2. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by 1 at this time.
Speaker 3: One moment for the first question, please. The first question is from the line of Sowy Caramanoli with Royal Bank of Canada. Your question, please. Hi, thank you for taking my question. Good question.
Speaker 4: fund capacity on the EgoTech jets. And maybe on the number of additional customers, it would be helpful if you can comment by the development phase. And as a follow-up, is there an ideal split between how many customers projects we need to have at each stage of development? Thank you.
Speaker 2: Great. First question goes to Craig. Thanks for the question Zoe. So in terms of capacity, it's important to remember that we're still in the build out and ramp up phase and the whole design of the Just You Take Biologics concept is to be...
Speaker 2: modular in its expansion opportunities. So where are we today? We are not fully utilizing the full build out as it stands today.
Speaker 2: But in terms of the sales profile you have seen at the end of 2022, a lot of the sales that were completed in 2022 feed through the revenue in quarter 4 and indeed revenue into 2023.
Speaker 2: In terms of how many more customers we need before expanding, I think maybe the number of customers is maybe less important than the magnitude of the demand, if you like. And therefore, to your point about business mix, it's very important to recognize that um-
Speaker 2: The nature of the demand also lands on this facility in different ways. So first in-land batches for example take about nine months to complete and land into manufacturing.
Speaker 2: Whereas longer term preclinical process development moving into manufacturing at little stage span multiple phases and use different parts of the facility. The key thing is that we can expand.
Speaker 2: capacity in a modular fashion in a timely manner to meet the dynamics of that business need.
Speaker 2: That's exactly the concept of just, that's exactly why it's very agile in its approach.
Speaker 2: That's exactly the concept of justice, exactly why it's very agile in its approach. Thank you so much.
Speaker 2: Next question. Also, what does follow on, sorry to interrupt you. And let's go to the next question. Next question is from the line of people.
Speaker 3: Your question, please. Thank you. Peter with Old City. Just three questions, please. Could I push you a little more on Just? I know you said you don't expect a reach break even this year, but can you give us a little more on Just?
Speaker 3: some quantification as to how near to break even you expect to be by M23 and what gives you confidence capacity to use direction to be a ramp out in the current year.
Speaker 3: Secondly, you made some comments which I thought were interesting during your pre-prepared remarks. Can I just push you a little bit more in terms of what you're seeing and hearing from your customers? I'm pretty clear that we...
Speaker 3: see more players breaking themselves for a tough H1 and Q1 and those customers do stop. I just want to appreciate a little bit more from your perspectives from your vantage point.
Speaker 3: And then lastly again, on your guidance, you talk about new clinical trials and partner assets entering the clinic. Ellie Pickston was obviously disappointing for everyone, but can you just pull out maybe one or two assets that you're particularly excited about that fit in that bucket in terms of new clinical trials or partner assets? Thank you. That's a total brick.
Speaker 2: So on JUST and the market situation around JUST, I'll hand over to Matthias. On when it comes to what we hear from partners out there on...
Speaker 2: multiple dimensions, I understand the second question in this direction. I'll hand over to Craig. And when it comes to partner assets, I, for example, want to call out our neuro-asset that comes from our IPSC platform that is partnered with BMS, we have phase one.
Speaker 2: has been conducted where we see precision medicine at its best happening. And that's just one where I think we will see a lot of...
Speaker 2: just putting into a drug what we always have been seeing as the potential of these platforms. And that's why I think these are then the points where the validation of the platforms will come with the validation of the data points once we make them public, which as you know is in the hands of all partners.
Speaker 2: and other assets. I'm increasingly also excited about, for example, an asset that we have still in the pre-clinic in biology, which will go forward, which is funded. I'm very excited about multiple projects still in our collaboration.
Speaker 2: that we are running with Bayer. I'm also quite excited with, for example, assets that we will make visible coming out of our partnerships that we have initiated with Lilly Janssen-Noronodisk. So there's just a lot ongoing. I think that's the good news. But.
Speaker 2: and I understand the disappointment here, we will always only call out these assets once our partner will show progress. To give you another example here, Xanova, our partner in diabetes, will for example give a poster presentation in June where they will show how their device together with ourselves.
Speaker 2: is operating in the pre-clinic and can then make a clear judgment of how this will go forward in the clinic. Coming back to the first question to Matthias. Hi, Peter. It's Matthias here. Thank you for that question and that match. So, to offer you a little bit more on the drug situation. So, from today's first part, then.
Speaker 3: from the offer book situation and the capacity context. So where we look at J-POP investment at this moment of time, why we build our capacity as mentioned by Craig before, we over the full year, we don't expect break even on a full year basis as you also noted. I mean, what I can say is, we expect double digit growth on revenue.
Speaker 2: And to the second question, maybe Craig if you want to comment. Yeah, sure. Thanks Peter. So the question I think was around what the vibrations we're getting in the market and from our partners around the current context. It's certainly true that of course we are in very close contact with our partners and we hear some certain hours of feedback speaking from a group and we don't know how that goes. Yes.
Speaker 2: some cautionary notes, but at the same time we have a fantastic mix of partners, biotech, government, not-for-profit, big pharma as you've seen even today, and that business mix then very much protects us from one area or one segment finding it more challenging than another. And then I think it's absolutely true to say that today it will be another.
Speaker 2: Thank you for may Ed.
Speaker 2: at precision tools.
Speaker 2: like Transcatomics, Proteomics, Panhunter, this is not commodity in the industry. And that's why Evotech is such a differentiated partner because the moment today someone understands that there's a precise way of making a drug or there is an old fashioned way of making a drug, people just want to work with the precise way of doing it.
Speaker 2: And that's why, again, I think we are a bit better positioned here than many other players in the industry. And that's also rewarded by our partners. And that's why, yes, there's a very grim funding environment out there.
Speaker 2: But when you have the differentiator offering, I think you are kind of really putting here yourself into a different category.
Speaker 2: Thank you very much. Pleasure. We can go to the next question, please. And the next question is a follow-up from Zoe from Royal Bank of Canada.
Speaker 2: Pleasure. We can go to the next question, please. And the next question is a follow-up from Zoe Monley from Royal Bank of Canada. Zoe, your question, please.
Speaker 4: Yeah, sorry. You couldn't hear me earlier. I wanted to follow up on the question just to clarify around the business mix in terms of magnitude of demand for just. What I was asked there is, could we then assume that do you have like.
Speaker 4: a guidance in terms of how we should think about the number of projects. If it's like two projects that are similar to Alpine and DOJ that we need to see you sign in FY23 to reach that capacity or do we...
Speaker 4: or if that's not the case, 10 smaller earlier-stage projects that would reach that capacity. Thank you.
Speaker 3: Great question goes to Matthias. Thank you very much for that question. A little bit similar also to the question raised early on by Doria. I mean, our goal is to build a portfolio. Then across the stages from discovery to development clinical supplies manufacturing.
Speaker 3: and also across the types of customers and partners we work with. As you mentioned, the DOD as a disclosed partner, I mean, the public biotech or pharma. And I cannot comment on the exact numbers. It is important to build this portfolio. We have significant learnings over the history of EOTech as we build portfolios in different businesses along the value chain. So we will inject that.
Speaker 3: But the important message is here that in various stages of it, value chain needs to be reflected. So that's why we build a portfolio. And we are certainly focusing on developing five of those projects as we have disclosed, for instance, the beauty partnership. And maybe to add
Speaker 2: The portfolio that we need to generate is already with identified partners at this stage discussed. So it's not a question, is there anyone out there who we don't know today? The idea is that we know exactly that there are identified partners with identified projects.
Speaker 2: If that whole mix then comes together, that's a separate topic, but we know who we talk to. If I can just add one of our comments. Understanding the question perhaps in a different way, if you're asking is there a particular mix of work that needs to come in because the facility.
Speaker 2: highest restrictions or constraints, that's exactly important to understand that we can do either a large number of small projects or one massive project using the same infrastructure and the same facility in a very flexible and agile way. That's actually part of the concept.
Speaker 2: or constraints, that's exactly, it's exactly important to understand that we can do either a large number of small projects or one massive project using the same infrastructure and the same facility in a very flexible and agile way. That's actually part of the concept. Okay, great, thank you.
Speaker 2: Next question please. The next question is from the line of James with more of Stanley. Your question please. Hello, thank you for taking my questions. I've got three please. So the first one is on the guidance. Can you give us a little more colour on the component parts here please? So the constant FX guidance implies around about 11 to 14% growth year on year.
Speaker 2: So as it stands with Matthias mentioning that JustBio should see double digit growth as well, it implies a bit of a step down in growth for the base business. So what are you assuming here in terms of the base business, JustBio and also milestones? And if growth is expected to step down from that 30% that you highlighted earlier?
Speaker 2: what are the key factors driving this? Then on the proprietary R&D spend, it was towards the bottom end of the guidance as you highlighted. You've got the same range for 2023. How should we think about the step up to the 100 million by 2025? Is it necessary to spend the extra 20 to 30 million if you're still discovering a good number of assets with the current spend?
Speaker 2: DS. So you seem to be building out your your CDMO offering quite nicely. So how are you thinking about other modernities here from a CDMO perspective broadening out your offerings and what is the end goal with your CDMO business because you're going to have you potentially have a lot of captive customers.
Speaker 2: but also with the external customers who maybe don't use your other technologies as well. What's the plan there from a CDMO perspective? Thank you.
Speaker 2: Great question. Thank you so much. Let me probably the guidance question put at the end. The capital allocation question is, I think we see a dynamic environment and in a five-year plan which we have disclosed in 2021, we of course will reserve the freedom.
Speaker 2: to invest only in R&D projects and in R&D efforts where we see the opportunity to lead
Speaker 2: the industry or to generate significant and when I say significant, it's better than venture-like returns on an investment that we are making in R&D. At this stage, we feel very very comfortable in spending what we are spending. We could of course spend more because the demand on the platform is driven by excellent projects.
Speaker 2: Nevertheless, there is also a bit of a market uncertainty where to put what first. So that's why I would say our 17 million to 80 million R&D capital allocation this year is on conservative side where data will tell us and also partnerships will tell us.
Speaker 2: if we should increase this because again leadership in transcriptomics, economics, IP secrets, and cell therapies and our end-to-end shared R&D platform is absolutely justifying this. If we will need to go to the hundred, it's a very fair question and again that will largely depend on which kind of partnerships we are striking.
Speaker 2: Because for example, if you see today's neurodegenerative partnership, this now creates within this franchise out of the initial cost center for the search of novel targets, the profit center. What we then do is basically shift
Speaker 2: our R&D effort to, for example, neurodevelopmental diseases, which if we have capacity makes absolute sense to do this at the same time. So I think we'll oscillate around the number and keep a very open mind here to really invest into high returning projects.
Speaker 2: when it comes to elements of our guidance is top line that we, I think in all fairness,
Speaker 2: You see also us, of course, being a bit alarmed by elements like the SVP bank or by elements like biotech funding situations in the US. So that's why on the...
Speaker 2: I would say competitive based business with capacity, the main driver, it could well be that we are not growing as fast as in other areas. Nevertheless, I would not call this anywhere near a step down of course, because again.
Speaker 2: How many companies do you know that are growing their 13th year in a row, double-digit on both top line and bottom line? I would rather see what's the allocation of our capacity available.
Speaker 3: as the key constraint that we see. And that's then also for us more a question, which business do we take in and which business don't we take in at this stage? Because it's the opportunity cost of capacity.
Speaker 3: that is driving us here. It's not that there wouldn't be a market demand that we could fulfill, absolutely not. And what we are not intending to do is to...
Speaker 2: run for business on the basis of prices that we have to fill the platform. That's not our strategy at all. So therefore here I would absolutely not see a step down in growth as you are indicating. When we come to the elements of our guidance, there's of course one element there which we don't exactly know how it will come in.
Speaker 2: which is the number of milestones that we will collect here, where we expect a higher number than in 2022. That is at this stage factored into the guidance because we have a larger number of milestone-bearing collaborations that will come to data points.
Speaker 2: And that's of course always an element of variability. And that's, I would say started early in the year now with data points that we see. There can be data points coming on top of that, but there could also be data points that fall away from that. That's why you see here probably a very balanced.
Speaker 2: first guidance that we wanted to give. And there was a third question. The CDMO overall strategy, maybe if I may hand over to Matthias on that question. There was a service for us to identify the
Speaker 3: but we also presented as our focus areas the end-to-end shared R&D platform. It's really the mix of the type of project and the type of customers where we focus on our integrated value proposition versus specific, even okay capabilities. In summary, it's…
Speaker 2: but for the time being it remains this high but more. And there is not a modality planned at this stage that we want to add. It's the opposite, we wanna win in all the modalities where we are in right now. Especially dialogics. Yep, good.
Speaker 2: I think that answers your questions because there's been... Thank you very much. Thanks, Len. Bye-bye.
Speaker 3: The next question is from the line of Michael Rice, Humanizing America. Great. Thanks for taking the question. First, I want to ask if you have any comments on quantifying the personal miles collaboration you announced just recently.
Speaker 3: Some comments in the PR when those came out, but maybe you could talk through the comment that was recognized in 4Q versus 1Q, whether that's split between execute and innovate, and if there's anything else that we should be keeping an eye out for in terms of the 2023 guidance that's attributed to that. I know it's cut to parts now.
Speaker 2: ongoing collaboration. What you will see coming on top of that is an eight-year deal with a 15 million upfront, which we most likely will spread out over the time. Maybe there's a dynamic element in there, but most of it will go over time. So therefore it's not a single one in a $2 billion building policy orHi worldomy.
Speaker 2: very significant contribution to what we have already expected in 23. But there is a huge portfolio of projects that we are building that are attributed to significant milestones. And when we say 4 billion milestones as the potential, you should always see that on top of that.
Speaker 2: There's a double-digit royalty that is coming, so it's not only 4 billion people potentially, it's even higher than that. If you would look at the royalties that are attached to that. And this is not milestones that are coming by the end of a product development. These are many of the milestones coming very early on in the projects already. And as you maybe have seen
Speaker 2: 75 million payments in Q1 already from BMS. This was pre-clinical projects in lead optimization stages. So these are milestones that can happen within one to two to three years of the start of the collaboration and that can be significant in a double-digit range.
Speaker 3: profitability which again leads us to that this will be a contributor for Action Plan 2025 EPD 8.
Speaker 2: I hope this gives you color and of course what we are not allowed to disclose is how broad and into how many indications we are building this, but as I already mentioned, BMS is building a full therapeutic...
Speaker 3: franchise in neuro and a large pharma company has to think about them also about a large number of opportunities ground that they are building because this will remain an area of also failure in the future and that's why I think creating a multiple starting points is exactly what we are doing.
Speaker 3: Given the early milestone components, that's where we have been picking hopefully very much from that. Okay. Maybe somewhat related to that, or based on that answer, anything can tell us in terms of.
Speaker 3: seasonality if you work through 2023 as you called out. You typically have a higher 4Q and so the year goes along. But I think 2022 is a very exaggerated version of that, the 3Q to 4Q step up. So everything you can tell us in terms of how we should be thinking about 2023 progressing just as far as visibility you have now. So,
Speaker 2: There were not many people who believed when we reported Q3 numbers that we're going to be above 100 million EBITDA so far to see the reality. We absolutely hope that this will not be the pattern of this year. Again, I think we see always the pattern of the second half being stronger than the first half, especially also when it comes to milestones.
Q1 growth.
When it comes to the seasonality, you should see that last year energy prices really hit us in the first half. Quite hard and unexpectedly, supply chain costs came in also in the first half quite heavily. Counter-effect was FX, as you know. I think we did a very good job and thanks to the whole team.
in price adoptions in the second half. So we should benefit from this in the first half of 2023. I think the overall message is it should be much smoother.
than 2022 when it comes to seasonality for 2023. Great. And if I could go to the last one, but just on exactly what you're touching on now, some of the macro factors, some of the inflation, energy factors that hit you in 2022, especially in the first half of the year, just to be clear, how much of that continuing or sort of lingering into 2023 is in your outlook now? I guess, what's your expectation for inflation, wage inflation?
cost inflation that's built into the outlook now. Consistent with current levels, worsening and improving as the year goes on. Could you give us a direction of sense for that? I think we have ended Q4 and we have taken this more or less as the current view and put this into our expectations. If there are anomalies or external shocks like the SVP or banking crisis or another war and things like that, we have not planned for extreme scenarios that would be then negative surprises.
There could also be easing, for example, on energy costs, but we have not baked anything like this at this stage into our guidance. Thank you. Pleasure. Next question. The next question from the lab.
easing, for example, on energy costs, but we have not baked anything like this at this stage into our guidance. Thank you. Thanks. Pleasure. The next question. The next question from the line of Steven May was called. Your question.
I agree. Thanks for the question. I have two on Just Biologics. First question, and apologies if I missed it, but did you disclose what the capex is for J-Pod Redmond and Toulouse for this upcoming year? And then second question, it's a follow-up question on what we've discussed.
previously, but just wanted to dig a little bit deeper with regards to challenges in the marketplace. I know Q4, Just Biologics was very strong, but how are you thinking about the Just Biologics pipeline given the outlook of a possibly longer macro issues? Are you maintaining the costs and expansion timelines for Toulouse and additional expansion on Redmond?
Are those still intact or what are your thoughts of keeping the timelines versus slowing expansion?
Thank you. So the CapEx question will go to Eno and maybe to give you a bit of color on how we think about build out and other capacity elements in the bottom-of-the-scenes market, I'll then hand over to Craig again. Good. No pleasure. So the CapEx managers for 2022 on both together was in the range of roughly 75 million, obviously the main rate in 2022 already being with the CapEx managers.
with the European or truth-based J-Pod close to 60 million capex. And for 2023, for these two in particular, again, the absolute heavy weight going into Europe now, as this is the active building phase, will be above €130 million. That's what we're currently expecting.
fully on track and indeed continuing to expect that J-Pod 2 and TOLUS will come open in the second half of 2024 and there's no there's no let up of the of the timeline for that or the plan and of course as we've said before already in the call as well the the real one of the real advantages of this whole system is that it's actually quite
flexible and can be dynamically adjusted as the business demand comes in and the shape that it comes in. And please never, never forget, we are not investing with just Evotech Biologics in the capacity build up for Biologics which is ongoing for many, many players out there.
We are building a paradigm shift in biologics for more precise…
drugs that can be manufactured in a more flexible way at totally different cost of goods when people are shifting to continuous manufacturing. So please never mix up that this is not a capacity play. This is a paradigm shift that we are creating.
that can be manufactured in a more flexible way at totally different cost of goods when people are shifting to continuous manufacturing. So please never mix up that this is not a capacity play. This is a paradigm shift that we are creating.
Sorry for being so emotional on that one. But it's not needed. Thank you so much. Any other questions? The next question is from the line of Bill and Sal with H. Hi, good morning and thanks for taking questions. Good one for me.
Obviously, the point of conversation today has been the current funding environment for biotech, especially in the U.S. I'm just curious, has that led to any sort of strategic or tactical changes within the company or is it a function of just trying to, obviously you're continuing to do great success. I mean, is there a significant need for a significant pivot to sort of take away?
in June of this year.
This will point to a very grim picture of last year which we all felt, but it will be confirmed by these numbers.
Nevertheless, these numbers, if you look at them at the long-term trend, don't fall significantly below 2018-2019 numbers. And that I think is important if you look at the long-term trend and if the industry really from an overall funding perspective stabilizes around the 2019 numbers and then sees a comeback.
in the industry because of data that is also coming on top of the need to build pipelines, then I think that could be the situation that we see the worst very soon in the funding environment or have seen the worst very soon in the funding environment. I don't think it's over, but I think it will.
passed away like it has been in the last 20 years that I've been in this industry, always in a cyclical situation. Don't forget the large venture funds have raised significant capital in the year 2019-20 and they want to deploy money. Don't forget many private equity players have entered the scene.
and are now exploring the sector for opportunities, don't forget that we also see many public initiatives to wake up in the sector and build and invest into this segment here. And...
small signs of optimism we see from funding rounds that are happening again. The good news here, and I don't like to say it that way, is that finally many of these funding rounds have started to happen in the private environment at lower valuations, significantly lower valuations than in the past. But money flows on the basis of lower valuations again.
into the great scientific endeavors of early companies. And that's, I think, a positive sign, which is, of course, not good for variations of these companies, but it shows that many people are starting to do this. We can also testify to this because, as you know, Evotech has an exposure to more than 20 smaller companies where we are co-owners, and there we see quite positive movements of term sheets coming in again, of offers on the table for converts and so.
I don't know if this helps you to see the color that we are seeing here, but again, it's not over, but there are many signs in the policy direction. And the consequence for us in building Evotech has always been to create a differentiated offer.
for our partners and with this people are not coming for us when it comes to a non-differentiated experiment. People come to us if they want to have the best precision medicine experiment that can be made or the fastest turnaround of an experiment that can be made. So that's where our overall strategy with regard to the funding environment is food intake.
Great, that's very helpful, Warner. Pleasure. Maybe we go to the next question. The next question is from the line of Peter Wolf, with Jefferies. Hi, thanks for taking the question.
three left. First of all, just with regards to the Just Biologics business, I wonder if you think you've identified a number of partners and projects. I wonder if you could just outline what are the main points of contention or points of due diligence or main stumbling box, I guess, for those partners getting them over the line or perhaps equally for those that haven't.
decided what has so far been the main reason for customers electing not to to to indeed convert into signed customers for just Evatec and just to try and give us a sense of I guess what it is that the help of your partners are looking at this this business.
Secondly then, just with regards to the customer mix, I mean clearly there is, I think I might say, if you look at the percentages this year versus in the past, there's clearly increasing amounts of revenues from biotech. I guess a decreasing amount of revenues from the top 10 customers, a more diverse revenue base, it all makes sense given what we're seeing.
Do you think that's going to reverse, I guess, or in fact, either a conscious effort to perhaps try and reverse that somewhat, given obviously what we've seen talking about for a length so far with the biotech funding, or do you think that's just a way of the industry and the nature of Evotech and what you can provide your customers and therefore, you know, that that sort of diversification in photobio tech is unlikely to.
to reverse over the next few years. And then thirdly, perhaps slightly bizarrely, and apologies if this is completely off-face, but the recent things we've seen to do with non-human primates in the US, the challenges there, has that got any impact at all on Evitex business, I guess either positively or potentially negatively in terms of the limitations that there are there? Thank you. Michael? Actually, all three questions are market-driven and business development-driven, so therefore I would point with the first one and the second one definitely at Matthias, and the third one, maybe Matthias and Craig, if you both can comment on that. Okay. Thank you, Peter, for those questions. And let me start with question two, one, and then I'll start on three.
So, the customer mix and what you are seeing, the short answer is not just happening. So given what we observe with SVD, I mean, we of course have installed the process to look very carefully and thoroughly what choices do we make, which ones do we make, and just to think about it would take us partnering with the whole shared R&D economy with the full profile of players from a startup at a very early date all the way to big genre and to public operations.
So we make conscious choices and as you observe roughly a quarter sits in biotech, a much smaller portion of that in the US. So we feel quite good about the mix. Absolutely, it's somewhat reflecting who's innovating in the industry, but I want to just confirm that we look at this mix and we try to very carefully.
Your interesting question on JAF, let me use this opportunity to remind us here a little bit about our value proposition because in that light it's much easier to explain as you ask the question who says no to and why. Our value proposition is indeed a value proposition of the paradigm shift that's going because we offer AI, artificial intelligence with generative models actually.
Club continuous manufacturing, a highly flexible option where we can accelerate the process development, get directly into commercial supply and offer a very attractive COGS position. Now, this is very appealing. This led us in the last year to a tripling of the closed bares, as you have seen. We are working on that pipeline, expanding that pipeline. Typically, we have a high hit rate when it comes to entering this pipeline. So, that's for instance the case was first been tried.
and proposition and in short we have maybe some partners who are not attracted to that but whoever is attracted is then going into feasibility studies and then to come a data-driven answer.
On your third question, non-human primates, I can confirm we work on non-human primates. We don't have the issues that are out there in the market. And we are called Open for Business to expand our efforts in this space and look forward to the end. But Craig, from an operations perspective, maybe you want to add something there.
Yeah, thanks, Matthias. As Matthias said, the NHP's supply in E-Litec is secure and very high quality, so we don't have any negative implications of some of the recent reports and acknowledgements you'll have seen in the press for other parties. But perhaps the one thing to acknowledge and bear in mind is that these events, coupled with the regulatory environment, to really...
move the industry towards three R's, replacement, refinement, reduction and indeed ultimately with an ambition to phase out animal use and safety prediction in particular brings a potential very strong driver to our technologies in the predictive science and panel applications to safety assessment.
This is an area that we feel is very strong and investing heavily in R&D and building capabilities and therefore we are fully committed also to that whole alternative future of medicine's discovery and development using much more refined, human-oriented and predictive tools for safety assessment and future predictions. So Peter, if I may add.
If you look at the FDA modernization act 2.0, I think we see a very strong trend and a very strong bias to our offerings in this one, because I think we all understand that we want to go away from these tools and want to really shift here to much, much more modern omics driven technologies and that's what Evotech is offering. So I think overall.
This is a transition phase of non-human planets into modern phase. It will be not a fast transition, that's clear, for greater reasons, but we are leading the transition here. That's great, thank you. I was just asking a question as well. Thank you. Great. And next question, please.
The next question is from the line of the Joseph and WaspiX Securities. Great, thanks for taking my questions. Congrats on the results and the extension of the NERO deal. The question is related to the TPD Health Great Indigidation deal. You previously highlighted the
kind of important and growing element of FTE rates there of a kind of high margin contributor to the base business. I'm just wondering if you can handle the human element of that. So how many employees are now working on the collaboration and with this $75 million in new payments, what will this look like?
Yes, it's a great question because it probably also highlights how significantly larger our effort when it comes to proteomics and targeted protein degradation is than many of the absolutely great but small efforts in industry are.
And if you would look at the whole Evotech proteomics platform at this stage linked to targeted product integration together with BMS, you would have more than 200 people. You would have more than 40 mass spectrometers and you would have this fully operational on
on terabytes of data that is unparalleled at this stage in the industry. I don't give you more specifics on this one, but it shows you that it's a massive effort. And again, it's an effort.
which hasn't started and is ramping up now, this has been started already three, four years ago, has come to its full swing and is now generating faster more data than ever before again with more than 200.
scientists on this deal only. And it's in our hand and in our flexibility to staff this deal because it's our control of how we generate this data. And that's why we of course are cautious to keep this a profitable transaction at every moment in time.
What truly profitable is when we are achieving milestones, subject collaboration, and that's why there will be variability from quarter to quarter, how much effort we put behind it. But if it stays as productive as it is, it will be profitable at every quarter at a significant target.
Okay, that's great. Thank you. Next question, please. Next question is from the line of Michael Friedrich with Deutsche Bank. Your question. Thank you very much. I have one question left and that is on your BMS partnership. Can you provide a bit more kind of in progress in this compound that is in phase one currently?
And when do you expect the first clinical readouts there? Thank you. Unfortunately, I'm not allowed to give you color on this one with the exception that I think we will...
out there. Thank you. Unfortunately, I'm not allowed to give you color on this one with the exception that I think we know.
a lot about this compound, but we will never be able to disclose anything without the permission of our partners. Okay, thank you. Bye. And the next question is from the line of Christian Herman.
research. Your question please. Hello everyone. I want to circle back to your Janssen cooperation. Given that Janssen has terminated its cooperation with FATEFARE to DIPS just a week before you announced your plans, I'm a little bit curious about the potential added value you can give us some data points.
do you think you would be able to add with the collaboration with Janssen? I'm thinking about especially your immune surveillance and gate technology, and maybe also a little bit of an idea on how should we expect this program to proceed in the future.
Thank you, this is a great question, but I'm very sorry that unfortunately, without permission of our partner, we cannot disclose anything outside of what we have discussed on this partnership at this stage. I'm sure that there will be news coming and we are happy to share this with you, but at this stage, unfortunately, we cannot.
Okay, thank you very much. Nice try. And with this, I'm looking around in the virtual room and I'm asking for final questions if there are any, if there are none, then let me first thank you for the excellent presentation.
question, let me thank you for following us. Let me thank you for staying and keeping up this sector which has seen easier times than before, but this sector will come back with best of science because it's happening as we speak. All the very best and I hope to see you soon.
If I may, we have a final question. No, it's gone. Sorry for that. Thank you. That was indicated here on the platform as well. Great. All the best. Bye-bye.
Ladies and gentlemen, with this, the conference is now concluded and you may disconnect the phone. Thank you for joining and have a pleasant day. Goodbye.
So.