Q1 2025 Evotec SE Earnings Call
Ladies and gentlemen, welcome to the Evotec SC Quarterly Statement Q1 2025 Conference Call. I am George, the course collaborator. I would like to remind you that all participants will be listen only mode and the conference has been recorded.
The presentation will be followed by Q&A session.
You can try to stay for questions at any time by pressing star and one on your telephone.
The conference must not be recorded for publication or broadcast.
Speaker Change: At this time, it's mapped as a 200-volt Volker Braun, Head of IR and ESG. Let's go ahead.
Speaker Change: Thank you George, and good day, good afternoon to all of you following our Q1 2025 results with class today.
Speaker Change: Only three weeks after the presentation of our Strategic Review in April , we will be picking up on the discussions we had in the meantime with some of you.
and with that, I think I can...
Speaker Change: Move on to slide two in the presentation. As usual, it's my duty to point to the disclaimer and the cautionary note regarding forward-looking statement, which you find on that slide. And with that, I hand over to Christian Wojczewski, OSEO, the floor Zeus.
Christian Wojcewski: Good afternoon and thank you for taking the time to dial in during our last call on April 17th.
Christian Wojcewski: We shed our revised strategy. We talked about our value creation levers.
Christian Wojcewski: We explained the components of our mid-term plan and we provided guidance for 2025. The letter, based on our understanding of the current underlying market dynamics,
and Evotech-specific business development.
Today we will focus on Q1 results.
Our group performance in Q1 was in line.
with our expectations and along what we indicated.
Christian Wojcewski: three weeks ago. Therefore, we'll keep today's presentation short. Nevertheless, we have earmarked sufficient time for the dialogue with you after the presentation.
Christian Wojcewski: So let me start giving you an overview of the first quarter.
Thanks for watching!
Christian Wojcewski: Over the past couple of months, we have been able to close a few exciting deals.
Christian Wojcewski: We are particularly proud of the news around our protein degradation.
in collaboration with BMS.
which has made further progress.
We're expanding the number of high-value molecular glue degraders.
Christian Wojcewski: I will get back to this topic a bit later, since this collaboration is an excellent showcase for how our strategy of technology leadership translates into superior business opportunities.
Christian Wojcewski: Another highlight to mention is the reception of a grant from the Korean government to develop novel antibody treatments for lung fibrosis.
Christian Wojcewski: The signing of new expanded programs is a strong testament of our differentiated capabilities in drug discovery.
and will contribute to future revenue streams.
short-term
and as outlined in April.
Christian Wojcewski: The market in shared R&D remains soft, resulting in revenue decline versus Q1, 2024. And the overall revenue development in the first three months.
stays slightly below expectations.
Christian Wojcewski: In contrast, just AbleTech Biologics has again delivered strong growth against an already outstanding Q1 2024 result.
Christian Wojcewski: We see a growing customer list, which is extending from generic providers and smaller biotech to big pharma and biotech.
Christian Wojcewski: The revenue development in the first three months is slightly ahead of our expectations and shows a very encouraging trajectory for the future.
Christian Wojcewski: Three weeks ago I spoke about our new strategic direction at Evotech.
Christian Wojcewski: We strive for technology and science leadership in everything we do.
We're pioneers in drug discovery.
Christian Wojcewski: Together with our partners, we accelerate the journey from concept to cure. We achieve this by leveraging cutting-edge technology, disruptive science,
Christian Wojcewski: and AI-driven innovation. We're focusing on two business pillars, drug discovery and preclinical development, as well as just evotech biologics.
Christian Wojcewski: Following our conversation from last call, let me share some insights on how technology leadership leads to superior business opportunities.
Not in theory, but in real life.
Christian Wojcewski: In Shared R&D, our scope is sharply defined from early stage target ID to IND. We offer essential CRO services to our clients, such as synthetic chemistry, in vitro biology, protein sciences.
DMPK Services and others.
We provide our services on a stand-alone, transactional basis.
Christian Wojcewski: In our more advanced commercial model, exemplified in the lower part of this chart,
Christian Wojcewski: We help our customers to accelerate the journey of drug discovery.
to improve probabilities of success and to reduce risk.
We provide access to our proprietary tools.
next-generation technology, disease expertise,
and MassData to support a selected number of partners.
in Strategic Collaborations.
Christian Wojcewski: The CRO centrals then become a strong supporting element of those collaborations.
Christian Wojcewski: When it comes to our next generation platforms, I would like to highlight four, which are shown on the right side.
our
Morocco Patient Database, IPSC, Panomics, and Panhunter.
Chris.
Christian Wojcewski: EMPD, our Molecular Patient Database, has been built over years and is constantly expanded.
Christian Wojcewski: It not only covers clinical data, phenotypic data, biopsies, but in particularly also multi-omics data such as genome, transcriptome, proteome data.
Christian Wojcewski: Based on these data sets, Evotech is uniquely positioned to identify and validate disease signatures and mobile targets to intervene very effectively with disease processes.
Christian Wojcewski: Our iPSC platform enables us to take insights out of the NPD, forward into the drug discovery process, and build disease-relevant models directly based on patient cells and tissues.
Christian Wojcewski: and to comprehensively profile compounds in in vitro and in vivo models using omics technologies.
Christian Wojcewski: Finally, our Panhunter platform is a unique AI-supported analytics tool to effectively process and analyze these multi-dimensional data sets.
The amount of data that our platforms generate
It's huge.
For example, we've gathered over 500 billion data points.
from over 20,000 patients.
Christian Wojcewski: This represents the most complete data set for quite a large number of patient cohorts.
Christian Wojcewski: Our IPC platform allows us to model diseases in over 25 cell types.
Christian Wojcewski: Within these cell types we can cover over 250 genetic disease models.
Finally, using our panomics platforms,
Christian Wojcewski: and here in particular our transcriptomics and proteomics platform. We have generated over 3 million transcriptome and over 500,000 proteome profiles.
All three platforms operate at an unprecedented industrial scale.
and are made accessible to our strategic partners.
Of course.
We're applying AI-supported...
Christian Wojcewski: state-of-the-art data analytics to separate real signal from noise and thus to support our customers in the drug discovery journey.
So how are we generating value with this technology?
For example,
Christian Wojcewski: Both of our BMS collaborations are originally based on these platforms and they continue to thrive.
Christian Wojcewski: We launched a strategic partnership in the field of neurology almost 10 years ago.
for this partnership.
Christian Wojcewski: Molecular Patient Data and the IPSC platform have and continue to be an important driver.
Christian Wojcewski: In the beginning of March, we announced significant progress in this collaboration, which triggered a U.S. dollar $20 million payment.
Christian Wojcewski: While our neurology partnership originates from molecular patient data and the IPC platform, our oncology collaboration
Christian Wojcewski: shown here on this page, hinges more on our Omics platform.
Christian Wojcewski: It is progressing very successfully. Just recently, we announced key scientific achievements expounding the pipeline of high-value molecular glue degraders.
The performance-based payments amount to $75 million.
Furthermore, in the second half of last year,
Christian Wojcewski: We announced a further expansion of the collaboration into a new area.
Christian Wojcewski: In summary, our technology and science leadership in drug discovery is giving us access to business opportunities beyond the essential CRO services.
Christian Wojcewski: It broadens our addressable market and it provides superior value generation potential since Evotech not only has paid for services
Christian Wojcewski: but also participate significantly in the successful development of programs by milestones and royalties.
Christian Wojcewski: Let me now hand over to Paul who will speak about our Q1 results.
Thank you, Christian, and a warm welcome from my side.
Christian Wojcewski: Let me guide you through our first quarter financials in more detail.
Christian Wojcewski: Our Q1 2025 Group Revenues reached €200 million, a 4% decrease versus the first quarter of 2024.
Christian Wojcewski: Our revenue performance in the first quarter reflected two counterbalancing effects.
Christian Wojcewski: Firstly, our shared R&D revenue declined from €155.2m in the first quarter of 2024 to €140.6m in the first quarter of 2025 in a persisting soft market.
Christian Wojcewski: The year-over-year decline in revenues largely comes from our BMS activities and softer transactional discovery work.
This follows the trend that we saw in 2024.
Christian Wojcewski: As mentioned in our prior call, lower BMS revenue is a temporary effect with a partner where we've seen very strong continued growth over recent years and which is expected to continue in the mid-term.
Christian Wojcewski: As you heard in Christian's opening, looking forward, we have a strong BMS work packages and an excellent asset pipeline.
In contrast,
Christian Wojcewski: Just Ivatek Biologics continue to grow strongly in the first quarter.
Christian Wojcewski: reaching 59.4 million euros of revenue which compares favorably to a top comparison in the first quarter of 2024 and is slightly ahead of our expectations.
Christian Wojcewski: The majority of the first quarter 2025 year-on-year growth in Just Evotech biologics came from expanded contracts with existing non-Sandoz customers and our new customer base as we expand the reach of our technology.
Christian Wojcewski: Our R&D spending has reduced by 33% versus prior year as we direct our investments to those most relevant for our partners.
Christian Wojcewski: Our first quarter spending is now broadly in line with our new expected run rate for the year as we continue to focus on our R&D activities.
Thank you for watching!
Christian Wojcewski: Operating cash flow in the first quarter of 2025 has improved versus prior year first quarter due to favorable changes in working capital.
Christian Wojcewski: Our CapEx spend represents a substantial reduction versus the first quarter of 2024.
Christian Wojcewski: and reflects the planned ramp-down of the Just Ivatech Toulouse site investments and the move towards the new CapEx base level I mentioned in the last call.
Overall, our liquidity has been developing as expected.
Christian Wojcewski: Decreasing by €26 million to €371 million by the end of March 2025.
Christian Wojcewski: Our liquidity was supported by a drawdown of an existing R&D financing facility with proceeds of 44 million euros, which reduced the cash outflow from operating and investing activities.
Christian Wojcewski: Our net debt consequently increased to 107 million euros, translating to a net debt leverage of 5.97 times adjusted EBITDA.
Christian Wojcewski: As indicated during our April 17th call, we expect a temporarily elevated net debt leverage during the period of our covenant waivers.
Thank you for watching!
Christian Wojcewski: You may recall that in the April 17th update we provided a waterfall containing the building blocks for our full year 2025 guidance of 30 to 50 million euros of adjusted EBITDA.
Christian Wojcewski: One of those building blocks is incremental cost-out measures in our shared R&D business that will contribute on top of the Priority Reset Program.
Christian Wojcewski: We have already made significant progress on the implementation of those cost-out initiatives and we will see the accruing impact over the coming quarters.
Christian Wojcewski: Today I want to provide you with details of the implementation progress of three key measures.
Christian Wojcewski: Firstly, we've completed the closure of our Cologne site at the end of February, and have completed the remaining target role reductions by the end of the first quarter.
Christian Wojcewski: while some of those savings are already visible in our first quarter financials.
Christian Wojcewski: We should see the full run rate effects in the second quarter and following quarters.
Secondly,
Christian Wojcewski: We are carefully evaluating the need to rehire open positions based on our existing capacity and business need.
Christian Wojcewski: 180 FTE on top of those announced in the priority reset with much of this impact already in effect.
Thanks for watching!
Finally, we continue to challenge all areas of discretionary spend.
Christian Wojcewski: We're already seeing the first reductions on external spend versus 2024.
Christian Wojcewski: However, as our external spend is spread across the full year,
The progress will unfold over the remainder of 2025.
Christian Wojcewski: with the full benefit on our cost baseline seen over the remaining quarters.
Christian Wojcewski: Finally, a reminder of our full year 2025 guidance which we reconfirm with group revenues of 840 to 880 million euros.
Christian Wojcewski: R&D expenditure of 40 to 50 million euros and adjusted EBITDA of 30 to 50 million euros.
And lastly, another housekeeping item, our unchanged midterm outlook.
Christian Wojcewski: As presented on April 17, we expect the average annual growth rate over the coming four years to be in the range of 8-12% and EBITDA margin is expected to exceed 20% by 2028.
Thanks for watching!
As always, we are now happy to answer your questions.
So George, please start the Q&A session.
George: Thank you very much. We will now begin the question and answer session.
George: Anyone who wishes to ask a question may press star N1 on their touchtone telephone. You will hear a tone to confirm that you have entered the queue.
George: If you wish to remove yourself from the question queue, you may press star and 2.
George: Anyone who has a question may press star and 1 at this time.
Thank you for watching!
Speaker Change: Our first question comes from Christian Eymann with World Book Research. Please go ahead.
Speaker Change: to really engage you in additional CRO activities over the next months or years.
Thank you.
Speaker Change: Thanks Christian and maybe I'll start and we'll see if we
Paul Hitchin, on the first question
Speaker Change: As Paul was alluding to, the guidance remains for good reasons. As we said, we are slightly below expectations on shared R&D, slightly above on just-in-the-mix. We are aware.
Speaker Change: were probably a bit better on revenues than we expected and that's also why we see this
No need to
Speaker Change: change the outlook for the year. Obviously when it comes to shared R&D
As we already alluded to in the last call,
Speaker Change: There is right now a very soft market environment and everyone is observing what's happening. Yes, frankly, from a market perspective, no news to report. So that's why we
Speaker Change: We remain confident with our guidance that we gave in the last meeting on the biotech layoffs.
Well, it's obviously...
Speaker Change: Paul Hitchin, Volker Braun, Paul Hitchin, Paul Hitchin, Paul Hitchin, Paul Hitchin,
Speaker Change: The work needs to be done by someone and I guess that's your question. So we're happy to pick up the work that is then not being done anymore in-house, let's put it that way.
Thank you very much.
Charles Weston: Our next question comes from Charles Weston with RBC. Please go ahead.
Charles Weston: Hello, thanks for taking the questions. Three, please. The first is, could you provide some color on your pipeline in each of Just Diva Tech Biologics and Shared R&D, specifically around customer concentration, product concentration, perhaps outside of BMS and Sando, which are obviously very big?
Charles Weston: Secondly, on the Covenant, you said I think you have a waiver until Q3, does that mean it's tested in Q3 or is the first test in Q4 and what are the key levels that we should be looking at here?
Charles Weston: about what that means. Obviously there's the BMS payment but what else might be happening in working capital for the remainder of the year and are there any major payments for the rest of the year expected from your collaborations? Thank you.
the
Charles Weston: has changed over the last couple of years. We've seen in previous years a bit of a trend towards more concentration.
Charles Weston: towards larger accounts, particularly in the year 2023, I would say, where, fair to say, we peaked on the BMS side.
Paul Hitchin, Volker Braun
Charles Weston: The more recent trend is that this has softened a little bit so the concentration hasn't necessarily increased with regard to the super large accounts and
Charles Weston: I would almost want to say that 2023-2024 was probably the peak in terms of concentration that has come down a little bit.
Paul?
Paul: Hey Charles, just on your question around Covenant, just as a reminder, no active financial Covenant is in place, we've got Covenant waivers for drawn lines until Q3 2025 as you rightly say.
Paul: And what I would say to answer your specific questions, testing will be on in the fourth quarter on the third quarter results.
Paul: And in terms of development of working capital receipts, you heard at the beginning of the call around BMS payments, so we would expect those to come in over the course of the remainder of the year.
Paul: Much of which will be in the second quarter. And then in addition, as you appreciate, we have a number of just related work order payments, as is usual for us in that business.
Thank you.
Thank you.
George
Speaker Change: Good afternoon and thanks for taking my questions. You continue to highlight the soft...
Paul: environment for shared R&D and I think a few weeks ago discussing the continuation of a kind of decline across the first half of the year with perhaps some recovery in the second half.
I'm just interested in...
Speaker Change: How much do these future BMS work packages factor in? Does that alone return you to an upward trend or is there a certain amount of recovery in the other elements of shared R&D that is also required? Thank you.
Speaker Change: Thanks, Joseph, for the question. On the overall market trend, you may recall in April our message was
We see a soft market environment and we expect...
Speaker Change: the business to be around 2024 levels at the top end of our expectation, top end of our expectation.
Speaker Change: We see a recovery towards the end of the second half, right?
Speaker Change: and that hasn't changed. There is actually no indication in either direction that the market is either going south or...
Speaker Change: We also see business coming in, but as I said earlier in the April call, it comes in smaller chunks and there is more slicing of work.
Speaker Change: which indicates that there is more conservativeness in spending at the customer side.
Speaker Change: with regard to the BMES work packages. I'd like to remind you that obviously this is a large multi-year program and throughout the year and also over the years
We are moving along
Process.
Speaker Change: They come with different amount of work on our side and hence they also come with different amount of
and they come with different revenue profiles.
a partnership that is
Speaker Change: line month-over-month with this collaboration. That said, we mentioned that over the last 10 years, over the last five years,
Speaker Change: We've seen this partnership growing substantially, and we also expect, given the work that we're doing and the recent expansion, that this will be the case also in the midterm future.
Speaker Change: You talked a few weeks ago about how the ramp-up for Toulouse is going to subdue EBITDA relative to 2024, and the first quarter indeed is coming quite strong. Could you perhaps just talk about the phasing of the ramp-up costs over the rest of the year, please?
Thank you.
Speaker Change: Paul will cover this one. Hi Joseph. You're right. First quarter, as we said, was stronger than expected.
Speaker Change: There's a little bit of phasing of those work packages that we expect within the year.
Speaker Change: But again, remain very confident on the four-year landing for Just Diva Tech.
Speaker Change: and those ramp-up costs will continue over the rest of the year.
Speaker Change: again as we described in the April call. So, we will continue to ramp up to ensure that we can serve the future Holmes.
Okay, thanks very much.
Speaker Change: Our next question comes from Finn Scherzler with Deutsche Bank. Please go ahead.
Finn Scherzler: Yes, hi and thanks for taking my question. I also have a couple on the FDTA development and in particular the
Finn Scherzler: phasing that you just mentioned. So can you maybe help us a bit with the magnitude of the phasing in the JEP business?
Finn Scherzler: So, what I'm trying to get at is, will the absolute EBITDA demand potentially fall again into Q for the segment?
Finn Scherzler: And then it would be interesting to hear on the remaining headcount reduction you had in the shared R&D business, how much was there still in one queue? So I'm trying to bridge again.
Finn Scherzler: the different moving parts and trying to get at where 2Q could end up. So if you could expand a bit on that, that would be great.
Speaker Change: while there were a few movements in the first quarter on the different segments overall the outlook remains I mean that's the most important message with Paul maybe a few more details no exactly thanks for the question so first of all
Speaker Change: Four year guidance remains so this is within our expectations. As I did say in the last question, there is a little bit of timing and overperformance in the first quarter for Justyou2 Tech.
Speaker Change: relative to our initial plans. That said, the segment continues to do well, remains within our overall plan for the year.
Speaker Change: and then we have some additional extra in the first quarter as we see some level of net attrition outflow.
Speaker Change: So, as I said in the overview, we enter the year in the first quarter where we need to be and aligned with what our guidance was, which we described in the April 17th call.
Speaker Change: The full run rate effect though, as I described, will only be visible over the course of the coming quarters.
Okay, thank you
Back to George, please.
Speaker Change: Thank you very much. We continue with a question of Charles Douglas with Wainwright. Please go ahead.
Doug Sau: Hi, good morning. I think that's me. This is Doug Sau from H.G. Wainwright. Can you hear me okay?
Doug Sau: So I guess obviously there's been questions about the overall environment, especially focused on industry and sort of the potential negative impact. I'm curious, as you look at the U.S., and I know this is
Doug Sau: potentially a very dynamic situation, and there could be changes, but the prospects for significant cuts to NIH funding, does that potentially create opportunities for you with a pullback in some of that very early-stage research? Thank you.
Doug Sau: As you rightfully say, it's not straightforward to project what's going to happen next.
That's why we also remain a bit cautious on statements.
On the exposure side, we already mentioned...
Doug Sau: So we're not expecting any direct impact, obviously. Then the question becomes, a footprint in the US, does it actually support?
and also that one we addressed last last meeting.
Doug Sau: We have research facilities on the East Coast to serve our clients from the Shiat Ali perspective. We have manufacturing facilities on the West Coast.
Doug Sau: to serve our just clients. So we're prepared but we also recognize that things are not moving that quickly given that everyone is still a bit on the parking lot and waiting how this all will be sorted out in the midterm.
Doug Sau: And, you know, I guess as a follow-up on just biologics, just given, so obviously, so far,
Speaker Change: I'm just curious, have you had conversations with clients who might be interested in perhaps shifting manufacturing if there does seem to be some kind of implementation of tariffs and does that make the U.S. side more attractive? Thank you.
Thanks doc and as I mentioned the
Speaker Change: whether it's ultimately triggered by terrorists or our great technology doesn't really matter but what I don't see or what we don't see is that on a weekly basis people come and leave
Speaker Change: This is so dynamic right now that it's really difficult also for our clients to make ultimate decisions. That said, as I mentioned, there is sufficient inbound activity here.
Speaker Change: to make a board statement that the Just Business will continue to strive for the next couple of quarters.
Okay, great. Thank you so much.
Speaker Change: Thank you for your time, and I will see you in the next one.
Speaker Change: Our next question comes from Brendan Smith with TD Coward. Please go ahead.
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Speaker Change: Actually, just a quick one from us. Apologies if I missed it, but I wanted to get your thoughts, actually, on the recent FDA announcement.
Speaker Change: and maybe if you expect anything similar on the horizon with EMA in Europe. Thank you.
Speaker Change: Thanks Brendan. Also not a new conversation, actually the EMA in Europe has been looking at that also since quite a while. I would say it's fair to say that we are well prepared for that but maybe Paul can you allude to that a little bit.
Speaker Change: Thank you for the question. Technologically, Evotech is really excellently positioned for this, mainly due to the fact that we have for quite some time focused on
patient-centric approaches, in particular, in molecular patient databases.
Speaker Change: IPSC technology to model in vitro diseases and in particular the panomics approach which is really using omics technologies to bridge the gap between in vitro and vivo models in the clinic.
and so technologically we're extremely well positioned.
who adapted these technologies there.
Speaker Change: I would say that the pickup commercially is still sort of muted at this point in time.
Speaker Change: believe that, you know, discussions that we used to have and how, you know, this could be done better in the future will create more, will have more traction going forward here on these discussions going forward.
Thanks for watching!
Okay, great. Thank you.
Thanks Brendan and back to George
There are no more questions at this time.
Mr. Braun: I now hand over back to Mr. Braun for any closing remarks.
Speaker Change: Thank you, George, and thanks to all of you who participated in this call, and thank you for the questions. In case you want to discuss more details in the coming days, feel free to reach out to me. The line, as usual, is always open. Next opportunity for all of us to meet in person is our AGM on the 3rd of June in Hamburg. We are looking forward to seeing as many of you as possible there.
Mr. Braun: to continue the dialogue. Thank you very much for now. Have a great rest of the day and goodbye.
Mr. Braun: Thank you very much, ladies and gentlemen, the conference is now over. Thank you for choosing Course Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
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Thank you.
Paul Hitchin: and Paul Hitchin, Volker Braun, Paul Hitchin, Paul Hitchin, Paul Hitchin, Paul Hitchin,