Q3 2025 Evotec SE Earnings Call
Speaker #3: Ladies and gentlemen , welcome to the Evotec SE quarterly Statement nine M 2025 Conference Call . I'm Lorenzo de coal operator . I would like to remind you that all participants will be listen only mode .
Operator 2: Ladies and gentlemen, welcome to the Evotec SE Quarterly Statement 9M2025 Conference Call. I'm Lorenzo, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for question at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Volker Braun, Head of IR and ESG. Please go ahead, sir.
Speaker #3: And the conference is being recorded . The presentation will be followed by a Q&A session . You can register for questions at any time by pressing star and one on your telephone .
Speaker #3: For operator assistance , please press star and zero . The conference must not be recorded for publication or broadcast at this time . It's my pleasure to hand over to Volker Braun , head of IR and ESG .
Speaker #3: Please go ahead , sir .
Speaker #4: Thank you , Lorenzo , and good morning . Good afternoon to all of you in this call , we have a lot to cover today and I'll keep my part very short .
Volker Braun: Thank you, Lorenzo, and good morning, good afternoon to all of you in this call. We have a lot to cover today, and I'll keep my part very short. Let's move on to cover the housekeeping items on page 2. We share the cautionary language here as usual, and some statements will be future-looking based on information available today, and they might be subject to change in future. Now let me hand over to our CEO, Dr. Christian Wojczewski. Christian, please.
Speaker #4: So let's move on to cover the housekeeping items on page two . We share the cautionary language here as usual , and some statements will be future looking based on information available today .
Speaker #4: And they might be subject to change in future . But now let me hand over to our CEO , Doctor Christian Wojczewski Christian , please .
Speaker #4: Thank you . Folker .
Christian Wojczewski: Thank you, Volker. Good morning and good afternoon to everyone. It's a pleasure to welcome you all to this call. I'm looking forward to taking you through the progress we've made over the past 6 months of transition since the announcement of our new strategy. Very pleased with the momentum and high speed of our transformation toward better monetizing our technology leadership. The steps we've taken in the past couple of quarters are a strong fundament for our value creation path and for the execution of our midterm outlook. I'm confident that this will become more visible to you while we lead you through this presentation. Let us now take a closer look at the year-to-date performance. In the first 9 months, group revenues landed at EUR 535.1 million, which is a 7% decline versus the previous year.
Speaker #5: Good morning and good afternoon to everyone . It's a pleasure to welcome you all to this call . I'm looking forward to taking you through the progress we've made over the past six months of transition .
Speaker #5: Since the announcement of our new strategy . Very pleased with the momentum and high speed of our transformation toward better monetizing our technology .
Speaker #5: Leadership . The steps we've taken in the past couple of quarters are a strong fundament for our value creation path and for the execution of our mid-term outlook .
Speaker #5: I'm confident that this will become more visible to you while we lead you through this presentation . Let us now take a closer look at the year to date performance in the first nine months , group revenues landed at €535.1 million , which is a 7% decline versus the previous year .
Speaker #5: This is driven by our Dmpd business , where we face continued softness in the early drug discovery market , leading to 12% revenue decline .
Christian Wojczewski: This is driven by our DMPD business, where we face continued softness in the early drug discovery market, leading to 12% revenue decline. In contrast, our biologics business, JABS, remains on a strong growth path with +11% growth in the first 9 months. As mentioned in the last call, we expect the trend in DMPD to continue in H2 2025, while for Just - Evotec Biologics, we anticipate revenue growth to further accelerate. Taking a closer look into the DMPD business, we see several main elements driving past and future performance. Talking about the early drug discovery market environment, the VC funding for biotech is certainly not yet favorable, affecting the business development activities of the transactional service business.
Speaker #5: In contrast , our biologics business jab remains on a strong growth path with 11% growth in the first nine months . As mentioned in the last call , we expect the trend in Dmpd to continue in the second half of 2025 .
Speaker #5: While for just Evotec biologics , we anticipate revenue growth to further accelerate . Taking a closer look into the Dmpd business , we see several main elements driving past and future performance .
Speaker #5: Talking about the early drug discovery market environment , the VC funding for biotech is certainly not yet favorable , affecting the business development activities of the transactional service business .
Speaker #5: However , over the last two quarters , the number and value of proposals going out from Evotec to customers is clearly trending upward , indicating that the business is stabilizing .
Christian Wojczewski: However, over the last 2 quarters, the number and value of proposals going out from Evotec to customers is clearly trending upward, indicating that the business is stabilizing. The level of negative change order volumes in Q3 have substantially improved versus first 2 quarters. In the meanwhile, we've taken appropriate actions to adjust our cost base. We've introduced a new organization structure, we're strengthening our commercial and operational capabilities. 12 months ago, we were targeting EUR 30 million of cost out in 2025. We raised the bar over the course of the year, during the last call, we committed to EUR 60 million of cost out, we will stay ahead of plan. As announced last call, we're working on delivering additional EUR 50 million of cost out and productivity measures in future. You should expect a full update on the initiatives we're working on during our next call.
Speaker #5: Also , the level of negative change order volumes in Q3 has substantially improved versus first two quarters . In the meanwhile , we've taken appropriate actions to adjust our cost base .
Speaker #5: We've introduced a new organization structure , and we're strengthening our commercial and operational capabilities . 12 months ago , we were targeting $30 million of cost out .
Speaker #5: In 2025 , we raised the bar over the course of the year , and during the last call , we committed to 60 million of cost out and we will stay ahead of plan .
Speaker #5: As announced last call , we're working on delivering additional 50 million of cost out and productivity measures in future . You should expect a full update on the initiatives we're working on during our next call .
Speaker #5: The business momentum with strategic partnerships remains healthy , ensuring continued mid-term revenue streams . Those strategic partnerships are expected to also result in meaningful progression of our asset portfolio over the next 6 to 9 months .
Christian Wojczewski: The business momentum with strategic partnerships remains healthy, ensuring continued midterm revenue streams. Those strategic partnerships are expected to also result in meaningful progression of our asset portfolio over the next 6 to 9 months. Several catalysts lie ahead of us, leading to the transition of molecules from the early drug discovery stage into preclinical and from preclinical into clinic. I'm pleased to announce today that we're expecting up to 4 molecules from our partnered asset pipeline to be in phase II clinical studies in 2026. This is exciting news for Evotec as it demonstrates the scientific strength and the outstanding capability of our technology. It underpins our plan to generate meaningful upside through milestone and royalty payments in future. More about this a bit later. At Just - Evotec Biologics, we're making great progress in our efforts to diversify and broaden our customer portfolio.
Speaker #5: Several catalysts lie ahead of us , leading to the transition of molecules from the early drug discovery stage into preclinical and from preclinical into clinic .
Speaker #5: And I'm pleased to announce today that we're expecting up to four molecules from our partnered asset pipeline to be in phase two clinical studies in 2026 .
Speaker #5: This is exciting news for Evotec , as it demonstrates the scientific strength and the outstanding capability of our technology , and it underpins our plan to generate meaningful upside through milestone and royalty payments in future .
Speaker #5: More about this a bit later at just Evotec Biologics , we're making great progress in our efforts to diversify and broaden our customer portfolio business development with a non-standard dose and Non-dod business is moving fast .
Christian Wojczewski: Business development with a non-Sandoz and non-DOD business is moving fast. The momentum for this part of the business has further accelerated versus H1 results to now over 100% growth after 9 months. Moreover, we signed a transformational deal between Just - Evotec Biologics and Sandoz just hours ago. This landmark transaction is a strong testament to our cutting-edge technology and capabilities in the fast-growing biologics business. It will unlock payments of more than $650 million over the next years. In addition, we expect to generate sizable revenues from royalty streams related to 10 biosimilars. We're extremely excited and proud to have been selected as partner by Sandoz on their path to shaping the biosimilars market. In a nutshell, we're well on track with our strategy, driving both scientific and operational excellence.
Speaker #5: The momentum for this part of the business has further accelerated versus half year results to now over 100% growth . After nine months .
Speaker #5: Moreover , we signed a transformational deal between just Evotec Biologics and Sandoz just hours ago . This landmark transaction is a strong testament to our cutting edge technology and capabilities in the fast growing biologics business .
Speaker #5: It will unlock payments of more than $650 million over the next years . In addition , we expect to generate sizable revenues from royalty streams related to ten biosimilars .
Speaker #5: We are extremely excited and proud to have been selected as a partner by Sandoz on their path to shaping the biosimilars market. In a nutshell, we're well on track with our strategy driving both scientific and operational excellence.
Speaker #5: Since the VC funding for biotech customers is relevant for approximately 30 to 40% of our revenue base in the NPD , let me share some further background information about the market trend .
Christian Wojczewski: Since the VC funding for biotech customers is relevant for approximately 30% to 40% of our revenue base in DMPD, let me share some further background information about the market trend. Updated data on total venture capital funding environment shows no material change compared to the analysis we shared in August. The absolute funding level has not grown over the past 2 quarters. The share related to discovery and preclinical-stage companies remains well below pre-pandemic levels, suggesting a continuing short-term investment focus on companies with clinical-stage assets. We spoke about the temporary deprioritization of early discovery and development activities in funding. It needs to be overcome before we see a forceful recovery of the early drug discovery market. That said, we do see some encouraging developments. Negative change orders are normalizing, and customer activities are increasing.
Speaker #5: Updated data on total venture capital funding , environment shows no material change compared to the analysis we shared in August . The absolute funding level has not grown over the past two quarters .
Speaker #5: The share related to discovery and preclinical stage companies remains well below pre-pandemic levels , suggesting a continuing short term investment focus on companies with clinical stage assets .
Speaker #5: We spoke about the temporary deprioritization of early discovery and development activities in funding . It needs to be overcome before we see a forceful recovery of the early drug discovery market .
Speaker #5: That said , we do see some encouraging developments negative change orders are normalizing and customer activities are increasing . In the first half of 2025 , the balance between positive and negative change orders was impacted by higher than expected cancellation volume , contributing to a weaker sales performance in the NPD .
Christian Wojczewski: In H1 2025, the balance between + and - change orders was impacted by higher-than-expected cancellation volume, contributing to a weaker sales performance in DMPD. This effect was related to a small number of contracts which were canceled by customers, either for strategic or scientific reasons. In Q3, we're back to normal levels. The development of our change order balance is shown in the upper graph. In contrast to the comparably low funding activities for early-stage biotech, the business activity level at Evotec has picked up. The number of proposals issued to our customers has grown 20% over the past 2 quarters, and this is also in line with a growth in total value of proposals. Even though those early indicators are promising, we're not yet indicating a change of trends.
Speaker #5: This effect was related to a small number of contracts , which were canceled by customers either for strategic or scientific reasons . In Q3 , we're back to normal levels .
Speaker #5: The development of our change order balance is shown in the upper graph . In contrast to the comparably low funding activities for early stage biotech , the business activity level at Evotec has picked up the number of proposals issued to our customers has grown 20% over the past two quarters , and this is also in line with the growth in total value of proposals , even though those early indicators are promising , we are not yet indicating a change of trend .
Speaker #5: We remain vigilant in monitoring market developments and continue to adopt to our customers . Evolving needs in a more agile way . In parallel , we are building a more targeted go to market approach and as mentioned last time , we are strengthening our commercial organization .
Christian Wojczewski: We remain vigilant in monitoring market developments and continue to adapt to our customers' evolving needs in a more agile way. In parallel, we are building a more targeted go-to-market approach, and as mentioned last time, we are strengthening our commercial organization. I'd like to now hand over to Paul, who will guide you through our financial results.
Speaker #5: I'd like to now hand over to Paul , who will guide you through our financial results . Thank you . Christian , and .
Paul Hitchin: Thank you, Christian, and a warm welcome from my side. Let me guide you through our year-to-date results in a little more detail. Our first 9 months group revenues reached EUR 535 million, a 7% decline versus the same period in 2024 and is aligned with our expectations. Firstly, our DMPD revenues declined by 12% to EUR 391.9 million in a persisting soft market in early drug discovery, as Christian commented on in his introduction. Also, as mentioned last time, included in this result is the expected temporary decline in the BMS revenues. Adjusted Evotec Biologics business continues to grow strongly in the first 9 months of the year and is on track for a very strong 2025.
Speaker #6: A warm welcome from my side . Let me guide you through our year to date results in a little more detail . Our first nine months revenues reached €535 million , a 7% decline versus the same period in 2024 .
Speaker #6: And is aligned with our expectations . Firstly , our revenues declined by 12% to €391.9 million in a persisting soft market in early drug discovery .
Speaker #6: As Christian commented on in his introduction . Also , as mentioned last time , included in this result is the expected temporary decline in the BMS revenues .
Speaker #6: Our just Evotec biologics business continues to grow strongly . In the first nine months of the year , and is on track for a very strong 2025 .
Paul Hitchin: For the first 9 months of 2025, revenues reached EUR 143.2 million, which is up 11% versus H1 2024. As we mentioned last time, we continue to see a broadening of our customer base with non-Sandoz and non-DOD customers growing 105 in the first 9 months versus last year. During the first 9 months of 2025, our Sandoz business grew low single digits. Although, as we look forward, we expect meaningful full-year growth following the completion of the recently announced transaction, which will include multi-year consideration for technology access, development revenues, and product royalties.
Paul Hitchin: Our R&D spending remains on the trajectory shared last time and is reduced by 33% versus prior year period, from EUR 41.1 million in the first 9 months of 2024 to EUR 27.7 million in the first 9 months of 2025, as we direct our investments to those most relevant for our partners. Adjusted group EBITDA reached EUR -16.9 million, driven by the weaker than expected DMPD revenues and our fixed cost base. We are well on track with our cost down initiatives to deliver the EUR 60 million of in-year structural cost reduction in 2025 that we communicated in our last call. We also remain focused on delivering the additional midterm cost and productivity actions that we discussed in our April update. Our adjusted Evotec Biologics business remains ahead of expectations, helped by positive operating leverage despite the planned J.POD build-out.
Paul Hitchin: Bridging to our full-year outlook, we expect our Q4 profile to reflect the higher revenue contribution weighting that we have seen in prior years. In addition, our recent guidance update in July reflected lower full-year DMPD revenues with an overall improved business mix, including the effects of the events announced last night. Continuing with cash flow. Our year-to-date free cash flow has improved by 14% versus the same period last year. This is despite our Q3 operating cash flow having a tough comparable to last year when we received $125 million of BMS payments, whilst the recently announced BMS Neuro payments has only been received in the Q4 of this year.
Our recent guidance update in July reflected lower full year. Dmpd revenues with an overall improved business mix including the effects of the events announced last night.
Now, continuing with cash flow.
Are you are you here today? Free cash. Flow has improved by 14% versus the same period last year.
This is despite our third quarter, operating cash flow, having a tough comparable to last year, when we received 125 million of BMS payments, while for recently announced BMS, neuro payments has only been received in the fourth quarter of this year.
Paul Hitchin: However, in line with our expectations, our investing cash flow continued to see sequential improvements as we drive more rigor in our CapEx investment processes, whilst also completing the J.POD build-out. Our net debt levels grew versus Q2 2025, which also reflected the higher lease obligations following the adoption of a long-term lease agreement in our Hamburg facility. Following the completion of our transaction with Sandoz, planned in Q4 of this year, we expect our liquidity to be in a significantly stronger position with a residual long-term debt portfolio. With that, I hand over to Cord.
However, in line with our expectations, our investing cash flow. Continued to see sequential improvements as we drive more rigor in our capex. Investment processes was also completed the jpod buildout
On net debt levels grew versus the second quarter of 2025, which also reflected the higher lease. Obligations following the adoption of a long-term lease agreement in our Hamburg facility.
Following the completion of our transaction with Sandoz Landing. The fourth quarter of this year, we expect our liquidity to be in a significantly stronger position with the residual long-term debt portfolio.
Christian Wojczewski: Thank you, Paul, and good morning and good afternoon to everybody on the call also from my side.
With that, I hand over to chord.
Thank you, Paul and uh good morning and good afternoon to everybody on the call as for my side.
Cord Dohrmann: As you know, at Evotec we strive for technology and science leadership on our mission to pioneer drug discovery and development. Our ambition is to accelerate the journey from concept to cure in partnership with our customers. Today, we are pleased to talk about considerable achievements we have made along the strategy in both segments. Let me start with a look at the DMPD segment first. We are seeing great scientific progress with our strategic partnerships. Based on these achievements, we continue to feed and expand our strategic partnerships, and are confident that our core and asset pipeline will show substantial progress, not only in 2025, but also during the next 6 to 9 months. What is our approach? Christian already mentioned that we offer end-to-end discovery services, including development and also highly innovative drug discovery technology platforms.
As you know, at EOTech, we strive for technology and Science Leadership on our mission to Pioneer drug Discovery and development.
Our ambition is to accelerate the journey from concept to cure in partnership with our customers.
Today, we are pleased to talk about considerable achievements. We have made along the strategy in both segments.
Let me start with a look at the DND segment first.
We are seeing great scientific progress with our strategic Partnerships.
Based on these achievements, we continue to feed and expand our strategic Partnerships and our confident that our current asset pipeline will show substantial progress. Not only in 2025 but also during the next 6 to 9 months,
So what is our approach?
Question already mentioned that we offer end-to-end Discovery services including development and also highly Innovative drug Discovery. Technology platforms.
Cord Dohrmann: We strive to combine both offerings to create superior customer value. Our core service offering spans the entire value chain from target identification to IND. When we combine those individual services, we can seamlessly run integrated research projects using highly automated workflows. This train of services, shown in blue on this chart, is the backbone of our operations. Within our strategic partnerships, we are then adding proprietary AI-enabled technology platforms on top of this. These are shown here in pink. These platforms elevate our drug discovery platforms to the next level. Our AI-driven platforms are targeting, in particular, four goals. We create a much deeper understanding of disease biology and therefore patient stratification through our proprietary molecular patient database. We improve our target ID and validation efforts, as well as hit identification through superior in vitro disease models driven by our iPSC platform.
We strive to combine, both offerings to create Superior, customer value.
Higher value chain from Target. Identification to R&D.
When we combine those Individual Services, we can seamlessly run integrated research projects using highly automated workflows.
This train of services shown in Blue on this chart.
The backbone of our operations.
Within our strategic Partnerships, we are then adding proprietary AI enabled. Technology platforms on top of this. These are shown here in pink.
These platforms elevate our drug discovery platforms to our next level.
Our AI-driven platforms are targeting, in particular, four goals.
We create a much deeper understanding of disease, biology and therefore patient stratification through our proprietary molecular patient database.
We improve our Target ID in validation efforts, as well as hit identification through superior in vitro disease models.
Cord Dohrmann: We enhance and accelerate hit-to-lead and lead-out processes through in silico profiling and an AI-supported molecular design. We reduce the risk of failures due to industry-leading toxin safety predictive tools. This means that AI, for us, is not a standalone feature. We have embedded AI deeply into our toolbox, enhancing the performance of each and every platform in the value chain. Based on this, we not only shorten timelines, but we also improve outcomes. Let me briefly take you through the individual elements. Our proprietary molecular patient database consists not only of highest quality and comprehensive clinical data, but also of deep multi-omics data based on corresponding patient samples. This database is invaluable when it comes to target ID and validation, and is supported by AI machine learning algorithms.
The ipsc platform.
We enhance and accelerate hit to lead and lead off processes. So in silico, profiling and then I supported molecular design,
We do reduce the risk of failures due to Industrial even toxin safety predictive tools.
So this means that AI for us.
Is not a standalone feature.
We have embedded AI deeply into our toolbox, enhancing the performance of each and every platform in the value chain.
Based on these, we not only shorten timelines but we also improve outcomes.
That we briefly take you through the individual elements.
Our proprietary molecular patient database consists not only of the highest quality and comprehensive clinical data, but also of deep multiomics data based on corresponding patient samples.
this database is invaluable when it comes to Target ID and validation and is supported by AI, machine learning algorithms,
Cord Dohrmann: Our E.INVENT platform is a highly comprehensive suite of AI machine learning supported molecular design tools, predicting everything from solubility, ADME/Tox parameters, affinities to targets. Most importantly, it supports our and accelerates our molecular design cycles. Our in vitro safety platform is a suite of NAMs consisting of gold standard in vitro models, which are combining with high content omics and/or high content imaging data to predict the safety and tox profiles of drug candidates. We are doing this with extremely high accuracies. I will come to this in more detail later. Furthermore, we have an extremely versatile iPSC drug screening platform, which in combination with omics and high content imaging data, is able to profile disease relevance, as well as efficacy and safety of drug candidates throughout the drug discovery process with higher granularity and therefore higher accuracy than standard in vitro models.
Our event platform is a highly comprehensive suite of AI machine learning support at molecular design tools, predicting everything from solubility and metoX parameters affinity to targets. But most importantly, it supports and accelerates our molecular design cycles.
Our AE Safety platform is a suite of NS consisting of gold standard in vitro models, which are combined with high content, omics, and/or high content imaging data to predict the safety and toxic profiles of drug candidates.
We are doing this with extremely high accuracies and I will come to this in more detail later.
Cord Dohrmann: All of these platforms are underpinned by our seamless high-performance omics platforms, which can generate, in particular transcriptome, proteome, and metabolome data at highest quality and with unmatched throughput. I will come to the details here later as well. Finally, we are able to bring all of these data together in our data analysis tool called PanHunter. This tool facilitates the handling and the analysis of high-dimensional data sets and is in many areas AI machine learning supported. On the next page, I will show you selected examples of significant scientific achievements in 2025 and also talk about how they translate into commercial results with our strategic partners. Thereafter, I will show you how those partnerships are associated with highly attractive long-term financial upside. Let me take you through a few selected highlights.
Furthermore, we have an extremely versatile IPSC drug screening platform, which in combination with omics and high-content imaging data, is able to profile disease relevance, as well as the efficacy and safety of drug candidates throughout the discovery process with higher granularity and, therefore, higher accuracy than standard in vitro models.
All of these platforms are underpinned by our seamless. High performance omics platforms which can generate in particular, transcript on protein and Metabolism data at highest quality and with unmatched throughout
I will come to the details here later as well.
Finally, we are able to bring all of these data together in our data analysis, tool called pain Hunter. This tool facilitates, the handling and the analysis of high dimensional data sets and is in many areas. AI machine learning supported
On the next page, I will show you select the examples of significant scientific in 2025. And also talked about how they translate into commercial results with our strategic partners.
and thereafter, I would show you how those Partnerships are associated with highly attractive, long-term Financial upside
Cord Dohrmann: I have mentioned the importance of our Evotec molecular patient database as a foundation for a better understanding of disease processes and therefore also target ID and validation. In 2025, we have significantly expanded the database through the addition of new cohorts, in particular in kidney disease, obesity, but also immunological diseases. This database continues to support strategic partnerships while also generating multimillion-dollar success-based payments. As far as our iPSC drug discovery platform is concerned, we continue to upgrade our disease models into more complex organoid-type in vitro models. We have done this particularly successful in the kidney disease space. We continue to also make progress in our AI-supported small molecule design platform, E.INVENT.
But let me take you through a few selected highlights.
I have mentioned the importance of our Evotec molecular patient database as a foundation for a better understanding of disease processes.
And our and therefore also Target ID and validation. And in 2025, we have significantly expanded the the database
Through the addition of new cohorts in, in particular, kidney diseases, obesity, but also hematological diseases.
This database continues to support strategic Partnerships while also generating multi-million dollar success based payments.
How our ipac drug Discovery platform is concerned. We continue to upgrade our disease models, into more complex organoid type. In vitro models, we have done this particular, uh, particularly successful in the kidney disease space,
Cord Dohrmann: Here we continue to build models that support specifically the design of certain compound classes, as we believe that there are no one-size-fit-all models for that are suitable for every compound class. We mentioned previously that we continue to invest in new approach methodologies, NAMs, to predict safety and toxicology of drug candidates. Also, here we continue to make very significant progress by continuously improving our existing models while also adding further models. For example, our drug-induced liver injury tox prediction tool continues to improve, as now we have reached predictive accuracy of more than 90%. Similarly, we have developed a highly predictive cardiotox prediction tool, which also has a predictive accuracy of about 90%. A further example is a new model, a teratogenicity prediction tool, where we are currently approaching 80% of predictive accuracy.
We continue to also make progress in our AI supported small molecule design, platform and vent.
Here we continue to build models that support specifically the design of certain compound classes, as we believe that there are no 1 size, fit all models for that are suitable for every compound class.
You mentioned previously.
To invest in new approach. Methodologies nums to predict safety and toxicology of drug candidates.
Also here we continue to make very significant progress by continuously improving our existing models while also adding further models.
For example, our drug and dose deliver injury talks prediction tool continues to improve as now, we have reached pre predicted accuracy of more than 90%.
Similarly, we have developed a highly predictive cardio, tox prediction tool which also has a predictive accuracy of about 90%.
A further example is a new model of a genomic prediction tool.
Cord Dohrmann: To our knowledge, these omics and image-based AI-supported safety tox prediction tools are absolutely industry-leading when it comes to their predictive accuracies. Finally, I would like to briefly talk about scientific progress in our proteomics platform. Our high-performance proteomics platform continues to evolve. In 2025, we reached two landmark achievements. With our high-throughput transcriptomics platform called ScreenSeq, we conducted a high-throughput compound screen, screening over 250,000 compounds using transcriptomics as the primary readout. To our knowledge, this is an industry first and has never been done before. Similarly, we keep improving our proteomics platform. We have improved efficiency, automation, and throughput of our platform significantly, and expect to profile over 100,000 compounds in 2026 using proteomics as the primary readout.
Where we are currently approaching 80% of protective accuracy.
To our knowledge, these omics and image based AI supported safety. Talks prediction tools are absolutely industry-leading when it comes to their predicted accuracies.
Finally, I would like to briefly talk about scientific progress. In our policies, our higher performance panel continues to evolve in 2025, we reached 2 Landmark achievements
With our high-throughput compound screening platform called Screen Sake, we conducted a high-throughput compound screen of over 250,000 compounds using transcriptomics as the primary readout. To our knowledge, this is an industry first and has never been done before.
Cord Dohrmann: To our knowledge, there is no other company generating as many proteomic compound profiles in the industry or processing as many samples using proteomics. It is great to see that we continue to make this much progress on our AI-supported proprietary platform. Just as important is, however, that these platforms continue to support the business financially. The combined order value to these, directly tied to these AI-empowered platforms is currently north of EUR 200 million already. Beyond this, it is important to keep in mind that these platforms are not only supporting the business through research payments, they enable us to build strategic partnerships which fuel our partnered asset pipeline with very substantial financial upside. This is shown in more detail on the next slide. Today, Evotec has a pipeline of more than 100 projects.
Similarly, we keep improving our proteomics platforms. We have improved efficiency, Automation, and throughput of our platform significantly and expect to profile over 100,000 compounds in 2026 using ports as the primary readout.
To our knowledge. There is no other company, generating, as many proteomic, compound profiles in the industry or processing as many samples using proteomics.
So it is great to see that we continue to make uh this much progress on our AI supported proprietary platform.
Just as important is, however, that these platforms continue to support the business financially.
The combined order value to these directly tied to. These am part of platforms is currently north of 200 million already.
Beyond this, it is important to keep in mind that these platforms are, not only supporting the business through research payments, they enable us to build strategic Partnerships, which fuel our partnered asset pipeline, that's very substantial Financial Financial upside and this is shown in more detail on the next slide.
Cord Dohrmann: Over 60% of these projects are part of strategic partnerships and therefore fully supported by these. All of the more advanced assets, in particular those in clinical and pre-clinical stages, are supported by partnerships and therefore represent pure financial upside for Evotec. Collectively, this portfolio represents a non-risk-adjusted value of over EUR 16 billion just in milestones. In 2025, the pipeline progressed significantly, which means that the total milestone potential of more than EUR 16 billion, as well as significant royalties, is becoming increasingly tangible. Accumulated returns up to 2028 could total on the order of EUR 500 million. In April, we gave you a status update on our asset portfolio. At that time, in total, we had 12 projects of our 100 projects were beyond the discovery stages. Six of these were in pre-clinical stages and six in clinical phase I.
Today, Evotec has a pipeline of more than 100 projects. Over 60% of these projects are part of strategic partnerships and are therefore fully supported by them.
All of the more advanced Assets in particular, those in clinical and preclinical stages are supported by Partnerships and therefore represent pure Financial upside for evotec.
Collectively this portfolio represents a non-risk adjusted value of over 16 billion euros. Just in milestones.
In 2025 the pipeline progressed significantly, which means that the total Milestone potential of more than 16 billion as well, as significant royalties is becoming increasingly tangible. Um, the accumulated returns up to 2028 could total on the order of 500 million euros.
In April, the gave us status update on our asset portfolio.
Cord Dohrmann: In 2025, two assets have progressed from phase I to phase II of clinical development. We expect that one asset will move from the pre-clinic into the clinic. We anticipate further progress over the course of the next 6 to 9 months, with two further molecules expected to move to clinical phase II. This means that there's a high likelihood that our asset pipeline will have in total 4 molecules in clinical phase II, each of them with a different partner in different indication areas. We are clearly pleased with a lot of progress on multiple fronts. First of all, we have very significant scientific progress on AI-supported platforms. We have been able to show very significant progress in our clinical and pre-clinical portfolio of assets, with 2 new assets in phase II and additional assets expected to come to the clinic soon.
Time in total we had 12 projects of our to 100 projects were beyond the discovery stages. 6 of these were increased clinical stages and 6 and clinical Phase 1.
In 2025 2 assets have progressed from Phase 1 to phase 2 of clinical development.
Furthermore, we expect them that 1 assets will move from the pre-clinical into the clinic.
Over we anticipate further progress over the course of the next 6. To 9 months with 2, further molecules expected to move to clinical Phase 2.
This means that there's a high likelyhood that our asset pipeline will have in total 4 molecules in clinical Phase 2. Each of them with a different partner, in different indication areas.
Overall, we are clearly placed with a lot of progress on multiple fronts.
First of all, the we have very significant scientific progress, on AI supported platforms. We have been able to show very significant progress in our clinical and preclinical portfolio of assets.
Cord Dohrmann: Finally, our discovery stage pipeline also continues to expand and is expected to continue to fuel our pre-clinical stage portfolio going forward. A lot more exciting news is to come here within the next six to nine months. This is where I hand over and back to Christian.
With 2 new assets and Phase 2 and additional assets expected to come to the clinic soon.
And finally, our Discovery stage pipeline, also continues to expand and is expected to continue to fuel our preliminary stage portfolio. Going forward.
So, a lot more exciting news is to come here within the next 6 to 9 months.
Christian Wojczewski: Thank you, Cord. Let us now switch gears from monetizing technology leadership in PNPD over to doing the same for Just - Evotec Biologics. As you will have noted, last night, we announced the successful signing of the sale of the Just - Evotec Biologics Toulouse site to Sandoz. Under this transaction, Sandoz will acquire Just - Evotec Biologics EU, plus a technology license to our continuous manufacturing platform. The agreement includes additional license fees and development revenues. This marks a pivotal milestone in the journey of Just - Evotec Biologics and underscores the successful execution of our strategy. We aim to close the transaction together in 2025, subject to meeting customary closing conditions, including foreign direct investment clearance by the French authorities.
This is where I hand over and back to Christian.
Thank you court. Let us now switch gears from monetizing technology leadership in BND. Over to doing the same for just evotec biologics.
As you will have noted last night, we announced a successful signing of the sale of the just evotec biologics to lose sight to sendos.
Under this transactions and those will acquire just evotec, biologics EU, plus a technology license to our continuous manufacturing platform.
The agreement includes additional license fees and development revenues.
This marks a pivotal milestone in the Journey of just, even a biologics and underscores the successful execution of our strategy.
We aim to close the transaction together in 2025 subject to meeting customary closing conditions, including foreign direct investment clearance by the French authorities.
Christian Wojczewski: With the transaction, we are reconfiguring our successful partnership with Sandoz, which started back in 2023, with the intent to support the expansion of Sandoz biosimilars pipeline and was extended in July last year. We are now converting a collaboration that was based on a long-term manufacturing arrangement and a new partnership centered around technology transfer and enabling our partners. The rationale for the deal is clear and compelling, and it follows the strategy we outlined for the whole company. Number 1, we will focus on our core competencies. This is making business by leveraging our technology leadership. Our intent is not to run a fleet of manufacturing sites as a classic CDMO player. Number 2, we're entering a new episode of growth. Our commercial approach will pivot towards an asset lighter, higher margin business model.
With a transaction. We are reconfiguring our successful partnership with sendos.
Those with which started back in 2023.
With the intent to support the expansion of Sandoz biosimilars pipeline.
And was extend extended in July last year.
We are now converting a collaboration that was based on a long term manufacturing Arrangement and a new partnership centered around technology transfer and enabling our partners.
The rationale for the deal is clear and compelling, and it follows the strategy we outlined for the whole company.
Number 1.
We will focus on our core competencies. This is making business. By leveraging our technology leadership.
Our intent is not to run a fleet of manufacturing sites as a classic cdmo player.
Number 2, we're entering a new episode of growth.
Christian Wojczewski: One that leverages best our technology, scales to partnerships, avoids the need for large upfront capacity investments, and delivers superior returns. Number three, we remain fully equipped to serve all our customers through our center of excellence in Redmond and Seattle. Operationally, we have no limitations to support the growth plans of our partners. Number four, this deal is financially highly attractive for Evotec as it provides us with short, medium, and long-term economic benefits. On this page, you see a summary of the financial parameters of the deal. We've agreed on an initial consideration of about $350 million for the site transfer and upfront technology license payments, which will be effective short term. Over the midterm, Evotec has the potential to generate revenues from licenses and development services, plus milestones of over $300 million.
Our commercial approach will pivot towards an asset-lighter, higher-margin business model.
1 that leverages best our technology scales to Partnerships, avoids the need for large upfront capacity Investments.
And delivers Superior returns. Number 3,
we remain fully equipped.
To serve all our customers, through our center of excellence in Redmond and Seattle.
Operationally, we have no limitations to support the growth plans of our partners.
Number 4. This deal is financially. Highly attractive for evotec.
As it provides us with short medium, and long-term economic benefits.
On this page, you see a summary of the financial parameters of the deal.
We've agreed on an initial consideration of about $350 million.
For the site transfer and upfront. Technology license payments.
Which will be effective.
Short-term.
Christian Wojczewski: Those payments are related to enabling our partner to manufacture biosimilars. In the time period thereafter and starting with commercial success, Evotec is eligible to royalty payments for up to 10 molecules. These three phases, starting with a handover, create sustained cash flows over an extended period. At the same time, we improve our revenue mix, reduce CapEx intensity, and unlock high margin IP and technology streams. As part of the deal, up to 10 molecules developed with the Evotec continuous manufacturing technology are eligible for royalties. As recently published by Sandoz, the Evotec partnered molecules in development are targeting a fairly large share of the originator biologics market. For example, the 6 most advanced molecules address a combined net sales of approximately $92 billion. Another 4 molecules are currently not disclosed.
Over the midterm, aotech has the potential to generate revenue from licenses and development services plus Milestones of over 300 million dollars.
Those payments are related to enabling our partner to manufacture biosimilars.
In the time period thereafter and starting with commercial success, Evotec is eligible.
To royalty payments for up to 10 molecules.
These 3 phases, starting with a Handover.
Improve, our Revenue, mix reduce capex, intensity, and unlock high margin, IP and Technology streams.
As part of the deal up to 10 molecules developed with the evotech. Continuous manufacturing, technology are eligible for royalties.
As recently, published by Sandoz.
The evotech partnered molecules in development are targeting a fairly large share of the originator biologics Market.
for example, the 6, most advanced molecules address
A combined, net sales of approximately 92 billion dollars.
Another 4 molecules are currently not disclosed.
Christian Wojczewski: Looking ahead to the future of Just - Evotec Biologics beyond our great collaboration with Sandoz, our US operations will remain a center of excellence for biologics discovery, process development, and manufacturing. The hub of innovation fully aligned with our mission to discover, develop, and deliver the next generation of medicines faster, smarter, and more sustainably. Given the strong momentum of our US business with over 50 ongoing customer projects, we've expanded PNPD in Redmond and are contemplating further expansion in manufacturing selectively. Going forward, we will provide additional commercial routes for our customers to use our proprietary technology. With the transaction announced last night, we've validated the value of the technology, and we've demonstrated the IP licensing model for our continuous manufacturing platform is a very attractive path for our partners.
Looking ahead to the future of just evotec biologics beyond.
Our great Corporation collaboration with Sandoz.
Our U.S. operations will remain a center of excellence for biologics discovery processes, development, and manufacturing.
The Hub of innovation fully aligned with our mission to discover develop and deliver the next generation of medicine's faster smarter and more sustainably.
Given the strong momentum of our us business, with, over 50, ongoing customer projects.
With expanded P&P D in Redmond and are contemplating further expansion.
In manufacturing selectively.
Going forward, we will provide additional commercial routes for our customers to use our proprietary technology.
With a transaction announced last night.
Is validated the value of the technology and we demonstrated the IP licensing model.
For continuous, manufacturing platforms is a very attractive path for our partners.
Christian Wojczewski: We're now adding further optionality, including licensing of our cell lines, the perfusion media, and a launchpad concept to enable alternative manufacturing platforms via our J.POD design. In very simple terms, our job is to drive the innovation forward and to enable our partners to successfully launch and manufacture Biologics products. Just - Evotec Biologics has four main compelling modules to offer on this page in blue. J.DISCOVERY for molecule discovery, J.MD, our machine learning enables molecular development technology, JP3 for complex biologics process development, and the J.POD for continuous manufacturing. Until now, we have deployed this technology as part of an overall plan to manufacture Biologics. This would have required Evotec to continue to invest in the expansion of a manufacturing footprint. The transformation towards the next generation CDMO model allows us to now deploy the technology without having to make those investments.
We now adding further optionality, including licensing of our cell lines, the fusion media and the Launchpad concept to enable alternative manufacturing platforms.
Via our jpot design.
In very simple terms, our job is to drive the Innovation forward and to enable our partners to successfully launch and manufacture a biologics products.
Just it would take biologics has 4 main compelling modules to offer.
On this page in blue, J how for molecule discovery.
GMD.
Our machine learning enabled molecular development technology.
Jp3 for complex biologics, process development.
and the jpod for continuous manufacturing until now,
We have deployed this technology as part of an overall plan to manufacture biologics.
This would have required evotech to continue to invest in the expansion of a manufacturing footprint.
Christian Wojczewski: All components are already in place, such as J.Cell, J.Media, J.Train, and J.POD here in pink. The performance of our proprietary cells and cell culture media, customized for the perfusion-based continuous manufacturing process, is industry-leading. Today, we are only using them for in-house development. For tomorrow, we see the potential to leverage these assets along a product commercialization path. On the path to enable our customers, there are multiple options to ramp up manufacturing capacity using our technology without us directly investing, such as integrating a J.Train into a customer's facility or providing turnkey solutions at the customer's premises. Over to guidance and outlook. Our midterm outlook shared in April is based on the ambition to better leverage technology and science leadership, the foundation of our strategy.
The transformation towards the Next Generation. Cdmo model allows us to now, deploy the technology without having to make those Investments.
All components are already in place.
Such as jjo J. Media J train and jpot here in pink.
The performance of our proprietary cells and cell culture media.
Customized for the profusion based continuous manufacturing process.
Its industry-leading.
Today, we are only using them for in-house development.
For tomorrow.
We see the potential to leverage these assets along a product commercialization path.
On the path to enable our customers. There are multiple options to ramp up manufacturing capacity, using our technology without us directly investing.
Such as integrating, a J train into a customer's facility or providing TurnKey Solutions at the customer's premises.
Over to guidance and Outlook.
Our midterm Outlook shared in April, is based on the ambition to better leverage technology and science leadership.
The foundation of our strategy.
Christian Wojczewski: It is therefore encouraging to see that the endorsement of an important customer of Just - Evotec Biologics, such as Sandoz, translates into tangible results only a few months later. Furthermore, our asset portfolio in DMPD has substantially progressed. The visibility towards our midterm goals has improved substantially. You heard the detailed financial analysis from Paul earlier. I keep it short here on this page. Despite the headwinds in the early drug discovery market, we have full confidence and confirm our guidance for 2025, with a targeted revenue of EUR 760 to 800 million and an expected adjusted EBITDA in the range of EUR 30 to 50 million. We also see Evotec on track to reach its midterm outlook at 8% to 12% top line growth at EBITDA margins greater than 20%.
It is therefore encouraging to see that the endorsement of an important customer of just evotec biologics such as some dolls translates into tangible results. Only a few months later. Furthermore, our asset portfolio and dmpd has substantially progressed.
The visibility towards our midterm goals has improved substantially.
Keep it short here on this page, despite the headwinds, in the early drug Discovery Market.
We have full confidence and confirm our guidance for 2025.
With a targeted revenue of 760 to 800 million and an expected adjusted abda in the range of 30 to 50 million Eur.
We also see evotech on track to reach its mid-term Outlook at 8 to 12%, Top Line growth.
Christian Wojczewski: With the actions in place, we gain visibility and increase confidence in delivering our EBITDA margin. Let me conclude by making reference to what we discussed on 17 April this year with you. Only half a year later, we see three out of four levers of our midterm value creation unfolding their impacts. While it is too early to call the challenges in the DMPD market mastered, we see green shoots and continue to prepare our organization to be more competitive in this environment. Our cost out program is a health plan. We fast-track the execution of our new strategy at Just Evotec Biologics, the asset pipeline is progressing well. For now, I would like to say thank you. We're now happy to answer your questions. Back to Lorenzo.
At ABD, margins greater than 20%.
With the actions in place.
We gain visibility and increase, confidence in, delivering, our abda margin.
Let me conclude by making reference to what we discussed on 17th of April this year with you.
Only half a year later, we see 3 out of 4, levers of our mid-term value creation.
Unfolding their impacts.
While it is too early to call the CH challenges and the DMP dmpd Market mastered. We see green shots shoots and continue to prepare our organization to be more competitive in this environment.
Our cost, our program is ahead of plan.
With Fast Track the execution, execution of our new strategy at just a tech biologics.
And the asset pipeline is progressing. Well,
For now, I would like to say thank you.
When I'm happy to answer your questions.
Back to.
Lorenzo.
Operator 2: The first question comes from the line of Charles Weston from RBC. Please go ahead, sir.
We will now begin the question and answer session and anyone who wishes to ask a question, may press star and 1 on their Touchton telephone, you will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2
participant are requested disabled. The loudspeaker module asking a question.
anyone who has a question may press star and 1 at this time,
the first question comes from the line of Charles Weston from RBC. Please go ahead, sir.
Charles Weston: Hello. Thank you for taking the questions. They're kind of sequential in nature, so I'll just ask them one at a time, please. Firstly, just factually, how much were Sandoz revenues in the first nine months and what would the division have looked like without the Sandoz revenues and the associated costs in Toulouse?
Hello. Uh, thank you for taking the questions. Um, they're kind of sequential in nature so I'll just ask them 1 at a time. Please. And firstly just uh, factually. How how much was Sandow revenues uh in the first 9 months and or and what would the division have looked like uh without the Sandow revenues and the associated costs in to lose?
Christian Wojczewski: Okay, you want me to ask answer right away, right?
Charles Weston: Yes, please. That's okay.
Christian Wojczewski: I'll hand this over to Paul.
Paul Hitchin: Yeah. Hey, Charles. Good afternoon. I would answer your question as non-Sandoz revenue in our year to date was north of 50% of the overall year to date revenue. Also your question was around, I think, earnings contribution within that. If the way to think about that is within the Just profile that you see on a year-to-date basis, that includes the Toulouse build-out cost of around EUR 20 million. It gives you a little bit of a view of what our kind of normalized view of share and profitability looks like for the business. I hope.
Uh, are you going to, okay? So you want me to ask answer right away, right? Yes, please. That's okay. Hand it over to Paul.
Yeah, hey Charles, um, good afternoon. Um, so I would answer your question as Nan Sanders Revenue in aggregate with you. Today is north of 50% of the overall, uh, yearly.
Charles Weston: Okay. Thank you. Thank you. Associated with that therefore, how much of the EUR 30 to 50 million EBITDA guide for this year is the expected upfront recognition from the Sandoz deal?
Also your question was around. Uh I think earnings contribution um within that. Um so if if when you think about that is within the just profile that you see in a year State basis, that includes it to lose buildout costs of around 20 million. So it gives you a little bit of normalized view of share and profitability looks like for the deliveries. I hope
Okay, thank you. Thank you. And then and then associated with that. Therefore, um, how much is the 30- to 50 million? Ebit dog? Guides. For this year is the expected upfront recognition from the Sandow deal.
Paul Hitchin: Yeah. Just to give a little bit more color on the full-year bridge. First of all, on the DMPD segment, just to reiterate what we said last time, we see the similar trajectory on full-year revenues with DMPD. We do see some potential mix improvements from milestones as we get into the Q4. On the Just - Evotec Biologics side of the business, again, a couple of things. Continued outperformance on operating leverage as we approach the end of the year. Some impact of lower cost base in Toulouse, depending upon the completion timing, once our approvals are met. Indeed, there's a license recognition element from Sandoz.
Yeah, when I just to give a little bit more color on the full year Bridge. Um, so first of all on the dmpd segment, um, just reiterate, what we said, last time we seem to be similar trajectory on full year revenues with dmpd. We do see some potential mix improvements from Milestones as we get into the fourth quarter.
On the Justice side of the business. Um again couple of things continued out performance and operating Leverage
year.
Um, some impact of lower cost to lose, uh, depending upon the completion timing. Uh, once uh, approval is a net.
And we believe there's a license recognition element uh from from sandals.
Charles Weston: Sorry, I missed that last bit that you said, around just after operating leverage.
Um, sorry, I missed that last bit. That you said um, around just after operating leverage um,
Paul Hitchin: Lower cost base in Toulouse, depending upon completion timing. Yes, there is a license recognition from Sandoz, the split of which is included or the value of which is included within the initial consideration that is shown on the presentation, Charles. At this stage, we're not actually splitting out the license component within that initial $350 million of up front payment.
Charles Weston: Thank you. That just leads me onto the last one, please, for now, which is around the category from 2025 to 2028. You've given us those revenue, that revenue CAGR range. The margin guidance sort of implies EUR 140 to 180 million EBITDAR in 2028, off a number that, excluding the Sandoz deal, is kind of there or thereabout zero this year. Can you just help us understand what the trajectory is of that in terms of what we might expect as the sort of year-on-year progression over the next few years, and how lumpy it might be depending on those milestones that you've talked about?
Treated within the initial consideration. Uh, that is shown on the presentation Charles. And at this stage, we're not actually splitting out the, um, uh, the licensed component within that initial 350 million, uh, dollars above, um, payments.
Okay. And thank you that that just leads me on to the last 1. Please, for now, which is, uh, around the, uh, directory, uh, from 2025 2028, uh, you've given us those, um, Revenue, uh, that that Revenue KAG arrange, uh, the margin, uh, guidance sort of implies 140 to 180 million ibida in 2028. Um, offer number that, um, excluding the Sandow deal, is they are there about zero this year. So can you just help us understand what the trajectory is? Um, of that? Um, in terms of what we might expect as the sort of year on year progression over the next few years? Um and um and how lumpy it might be depending on those Milestones. That you've uh, you've talked about
Paul Hitchin: Yeah, Charles, let me have a go. On the midterm outlook, you said we announced 8% to 12% in the revenue CAGR growth with EBITDAR margin of 20% by 2028. Following the transaction and also the events that occurred so far this year in the DMPD business, I would say the revenue CAGR is on the lower end of that revenue range. However, we do see stronger potential on the EBITDAR margin rate versus our initial planning assumptions. As it pertains to milestones, obviously, as you know, those are quite lumpy in both sides of the business, whether it's on DMPD or the Just - Evotec Biologics business.
Yeah, Charles let me have a go. So um, on the midterm Outlook, you said we announced 8 to 12% in the revenue. Cargo grow with Eva Dar margin in descent by 20, uh, 28. Um, following the transaction, and also the, uh, events that uh, occurred so far this year in the dmpd business. I would say, the, the revenue kagar is uh, on the lower end of that, uh, Revenue range. However, we
Do you see stronger potential on the either down margin rate uh versus our initial, um, planning assumptions.
As it pertains to milestones.
Paul Hitchin: When you think about the transaction with Sandoz that we disclosed, where there is consideration between 2026 and 2028, what you should think about is around 2/3 of that is product development type activity, and about 1/3 is licenses and milestones, which are subject to certain meeting criteria. It gives you a little bit of flavor of what that may look like over that period of time over the next 3 years.
lumpy and both sides of the business, whether it's some dmpd or the just either technologics business, um, when you think about the transaction with, uh, Sandoz that we disclose, um, uh, where there are, uh, there is consideration between 2026 and 20228,
Um, what you should think about is around 2/3, of that is, is product development type activity, um, and about 1/3 is licenses Milestones, which are sub subject to, uh, certain meeting criteria. So it gives you all the flavor of uh, what that may look like over that period of time over the next 3 years.
Charles Weston: Okay. Thank you. Thanks very much for your help.
Paul Hitchin: Thanks, Charles.
Okay, thank you. Uh, thanks very much for your help.
Thanks Charles.
Operator 2: The next question comes from the line of Brendan Smith from TD. Please go ahead.
The next question comes from the line of Brandon Smith from TD. Please go ahead.
Brendan Smith: Great. Thanks for taking the questions, guys. Actually, I really appreciate all the color on the AI capabilities internally. I actually wanted to ask a bit more about this. Really, I guess to what extent the NAMs capabilities actually come up in your conversations with partners and customers thus far this year, if you've seen any material shift in that kind of tone. I mean, we get a lot of questions about whether pharma is kind of increasing investments in AI internally on their side is impacting their engagement with external partners offering those kinds of capabilities.
Great. Thanks for taking the questions guys. Um, actually I really appreciate all the color on the AI capabilities internally. So I actually wanted to ask a just a bit more about this. Um, and really I guess to what extent, um, the Noms capabilities actually come up in your conversations with partners and customers thus far this year. If you've seen any material shifts in that kind of tone, um, I mean, we get a lot of questions about whether Farmers kind of increasing investments in AI in,
Brendan Smith: Just wondering if you're seeing any demonstrative shift in where they're engaging on that set of things, or if NAMs offerings are actually increasing that, and how you might expect that to kind of help grow revenues over the next 12 to 18 months. Thanks.
Christian Wojczewski: Thanks, Brendan. I'll hand this over to Cord, and I'm really pleased to see also these questions. We recognize that we've maybe talked a little bit less in the past about those topics, but rest assured there's quite some activity at the Evotec side. Cord, please.
Cord Dohrmann: The NAMs are definitely getting more attention and also from the pharma side, particularly. Nevertheless, it's still sort of a sort of muted growth in the area at this point in time. We do see real signs of acceleration because people, a lot of projects, are integrating these NAMs at an earlier stage. You can imagine if you sort of have a predictive tool for drug-induced liver injury, if you introduce this late in the process, you essentially have to profile, you know, a handful of compounds maybe. If you introduce it early in the process, you are continuously profiling potentially hundreds of compounds.
Internally on their side is impacting, their engagement with external Partners offering those kinds of capabilities. So just wondering if you're seeing any demonstrate uh shift in where they're engaging on that set of things or if Noms offerings are actually increasing that. Um and how you might expect that to kind of help grow revenues over the next. Let's say, 12 to 18 months. Thanks, thanks Brandon. I hand this over to court and I really pleased to see. Also these questions we recognize that we've maybe talked a little bit less in the past about those topics. Rest assured is quite some activity, I'll be able to excite court, please. So the the the Norms are are uh definitely getting more attention. And uh also from the farmer side, uh particularly uh, nevertheless, it's still sort of a um, uh, a sort of muted growth in the area at this point in time. But we do see real real science acceleration because people a lot of projects uh, are integrating these
Cord Dohrmann: Here, this is why we keep talking about industrialization of these platforms and making them high throughput feasible. Because this sort of opens up the funnel to really bring this into the, on the critical path of the drug discovery value chain and incorporating these kind of assays at an earlier stage. Basically right after hit finding, essentially, you can start incorporating this. I think, with this, sort of seeing that people are getting more and more interested in incorporating these NAMs early, I would expect to see the revenues vastly accelerate on this front. If it's within the next 6 months, I would say that that would be very ambitious, but within the next 12 to 24 months, certainly.
Nums at an earlier stage. You can imagine if you sort of have a uh uh, a predictive tool for dog and do liver injury. Uh if you introduce this late in the process, you essentially have the profile, you know, a handful of compounds, maybe. Uh but if you introduce it early in the process you are continuously profiling potentially hundreds of compounds.
Think with this uh, sort of thing that people are getting more and more interested in incorporating, these nums early, I would expect to see the revenues uh uh vastly accelerate on this font if it's written on next. Uh 6 months. I would say that that would be very ambitious but within the next 12 to 24 months certainly
Brendan Smith: Got it. Thank you. That's very helpful.
got it. Thank you. That's very helpful.
Operator 2: As a reminder, if you wish to register for a question, please press star 1 on your telephone. The next question comes from the line of Falko Friedrichs from Deutsche Bank. Please go ahead.
As a reminder, if you wish to register for a question, please press star and 1 on your telephone.
The next question comes from the line of f Charter from virtual bank, please go ahead.
Falko Friedrichs [Director: Yes. Hi, thanks for taking my questions. The first one I would like to ask them one by one, it's on your drug discovery and preclinical development segment and whether you are able to give any sort of glimpse on what you expect into 2026. Some of your US peers sort of gave an early indication. I think consensus sits at around 5% growth for next year. Do you consider this a sensible starting point for the year or, as of now, would you point us to take a more cautious stance? I understood you spoke of green shoots and so on, but not really of an inflection yet. This would be very helpful.
um, so
Christian Wojczewski: Thanks, Falko, for the question. Obviously, our visibility at this point in time is not all the way through 2026. Keep in mind, collectively, the industry, since quite a bit was actually looking at when exactly the tipping point is happening. I'm a bit cautious with making statements about when exactly the market is coming back. As I said earlier, when you look at the individual bits and pieces here, you've seen on one slide, the change order pattern that wasn't favorable in Q1 and Q2, the negative change orders, but it was also related to a few individual wins. Q3 looks much better. You've seen the number of prospects going out, right, plus 20%.
The first 1, I would like to ask them 1 by 1. It's on your drug Discovery and preclinical development segment and whether you are able to give any sort of Glimpse on what you expect in the 2026, some of your USPS sort of gave an an an early indication. I think consensus sits at around 5% growth for next year. Um, do you consider this a sensible starting point for the year or, um, as of now would you point us to to take a more cautious stance? I understood you spoke of green shirts and so on, but not really of an inflection, yet this would be very helpful.
Yeah, thanks Finn for all the question. Obviously, our visibility at this point in time is not all the way through 2026 and uh, keep in mind, collectively the industry. Uh, since quite a bit was actually looking at
Christian Wojczewski: You can draw conclusions out of that, but I'm not doing it at this point in time because these prospects need to convert into sales orders. At this point in time, given that we have probably visibility into the next couple of months, I would not make a statement around +5% for the market next year.
Cautious with making statements about when exactly the market is, is coming back. Uh, and as I said earlier, when you look at uh, the individual bits and pieces, here you've seen um on 1 Slide, the change order pattern. There wasn't favorable in the first and second quarter, the negative change orders, but it was also related to a few individual events. Q3 looks much better. Then you've seen the number of prospects going out right plus 20%, um, you can draw conclusions out of that, but I'm not doing it at this point in time because this prospects need to convert into sales orders. So, um, at uh, at this point in time, given that we have probably visibility into the next couple of months.
Uh, I would I would not make a statement around plus 5% for the market next year.
Falko Friedrichs [Director: Okay. That's helpful. If I can maybe follow up with two shorter ones. On the profitability and the Discovery and Preclinical Development Segment, I think it was surprisingly weak this quarter, but the revenues were sequentially actually about stable. Could you maybe help explain that?
Okay, that's helpful. Um, if I can maybe, um, follow up with with 2 shorter ones, um, so on the profitability and the discovery and preclinical development segment, uh, I think it was surprisingly weak this quarter but the revenues were sequentially actually about stable. So, um,
could you maybe help explain that?
Christian Wojczewski: Say that again, please. I'm not sure.
Falko Friedrichs [Director: No, sorry. I was just saying that, I think the revenue in the discovery segment was pretty much flat, sequentially, but the profitability was much worse than probably expected. What was the explanation for that?
Say that again, please, I'm not sure. I
No, sorry. Sorry. I was just saying that. Um, I think the revenue and the discovery segment was pretty much flat um sequentially but the profitability was much worse uh worse than probably expected. What was the explanation for that?
Paul Hitchin: Yeah. Bernd, this is Paul again. When you look at the year-to-date profile of the DMPD business and then compared to Q3, you're correct that it appears to take a step down. We did actually in H1 have better mix and then also a license benefit in H1 that impacted positively. It didn't repeat in Q3. As I said in my comments, however, we do see further opportunities around milestones for Q4 for DMPD, and that volatility, if you like, on milestone recognition will continue in this segment. That explains the delta there.
Yeah, I think this is, uh, full again. Um, uh, when you look at the year to date profile, um, of the dmpd business and then compared to third quarter, you're correct that, um, it it appears to take a step down. We, we did actually, in the first half have better mixed. Uh, and then also, uh, a license, uh, benefit in the first half that, um, uh, impacts the positively we didn't repeat in the third quarter. Um, as I said in my comments, however, we do see further opportunity,
Duties around milestones for the fourth quarter, uh, for dmpd. And that that, that volatility, if you like on Milestone recognition or or continue in this segment, but that explains the, uh, the Delta there.
Falko Friedrichs [Director: Okay. Helpful. One last one on the Sandoz deal. I'm not sure, if you sort of compare the revenues that investors and the sales had expected from sort of your CDMO income stream that is now falling away, how does this compare to what you will get now in terms of licensing revenue and so on and so forth? Sort of the EUR 300 million package you describe. What I'm trying to understand is consensus sits at around EUR 420 million for the Just - Evotec Biologics business in 2028. Does that then look completely off from your point of view, or is this still sort of the right ballpark or are people totally misunderstanding this at the moment?
Consensus sits at around 420 million for the jab business, in 2028. Um, does that then look completely off from your point of view, or is this still sort of the right ballpark or people totally, um, misunderstanding this at the moment.
Christian Wojczewski: I think, a couple of points here. First of all, I try to explain that there is the Sandoz deal, and that's a fantastic opportunity to partner with Sandoz, and it will continue to generate revenues and profits for the company. There is another 50 customer projects that we're serving out of the US. Don't forget to keep that in consideration. What we said is we're basically pivoting to a different model, right? The way that we look at it is a much more capital effective way of doing business. Moving from a manufacturing view to a license model allows us to generate revenues in our view, at a higher margin rate and much more capital efficient.
I think, uh, a couple of, uh, points here. First of all, um, I I I try to explain that there is the tsounos deal and that's a fantastic, uh, opportunity to partner with Sandoz. And it will continue to generate revenues and and profit for the company. Then there is another 50 customer projects that we are serving out of the US. Don't forget to, uh, keep that in consideration. And then what we've said is, we're basically pivoting to our a different model, right? So, um,
The way that we look at it is much more capital.
Effective way of doing business.
Christian Wojczewski: That's the driver why we've concluded that this is a great deal for the company. As we said also last time from an NPV perspective, for us, this is a positive contribution.
So um moving from a manufacturing View to a licensed model allows us to generate revenues in our view uh at a higher margin rate and much more capital is efficient um and uh that's the driver, why we?
um,
Paul Hitchin: Yeah. There is some level of reduction on revenues, but as Christian rightly says, significant improvement in the gross margin, driven by that higher quality revenue mix, whether that's tech licenses, royalties, consumable sales that we talked about as well, and that lower capital intensity. We're trading to higher quality mix of business.
With concluded that this is a great deal for the company. Um and um, as we said also last time from an MPV perspective for us, this is a positive contribution.
Yeah, friend. So um, there is some level of reduction on revenues but it's interesting rightly says um significant Improvement in the gross margin uh driven by that higher quality Revenue mix, whether that's Tech, licenses royalties consumable sales that we've talked about as well and that lower Capital intensity. Um, so we're trading um uh to higher quality mix of business.
Falko Friedrichs [Director: Okay. That's very helpful. Thank you.
Okay, that's very helpful. Thank you.
Operator 2: The next question comes from the line of Michael Ryskin from Bank of America. Please go ahead.
The next question comes from the line of Michael risking from Bank of America. Please go ahead.
[Analyst] (Bank of America): Hi. Thank you for taking the question. This is Aaron on for Mike. You called out the soft early drug development market environment and VC biotech funding. Given the current market environment, can you talk a little bit about what you're hearing from customers, and related to that, a little bit more about the implications for the overall pricing environment?
Hi. Thank you for taking the question. This is Aaron on for Mike.
Um, you called out the soft early drug development Market, environment and the VC biotech funding.
Given the current market environment. You can talk a little bit, a little bit about what you're hearing from customers and related to that, a little bit more about the implications for the overall pricing environment.
Christian Wojczewski: I think there's still uncertainty in the market, especially in biotech, and I've also mentioned that our DMPD business, 30% to 40% of the revenues is related to biotech, so there's quite some exposure here. That's number one. Number two, as we also mentioned throughout the course of the year, while conversations continue, there's more slicing happening than what we've seen in the past. More cautious spending, less larger projects, more smaller projects, and decision-making is slower. That's a little bit the environment, the picture I've painted already in Q1 and in Q2.
so, um,
I think there's still uncertainty in the market, especially in biotech. And I've also mentioned that our DMPD business, 30% to 40% of the revenues, is related to biotech, so there's quite some exposure here. Uh, that's number one. Number two, as we also mentioned throughout the course of the year,
Christian Wojczewski: We see this continuing with maybe the difference that, as I said, the number of prospects have come up quite a bit over the course of the last month and quarters, which shows that there is more activity, hopefully also more prospects for 2026. Pricing obviously is a function of also capacity in the market. It's clear that there has been overcapacity across the market in drug discovery, but it's also clear that most players are right now adjusting like we are doing it. I see this actually also starting to normalize when demand and capacity is coming more into balance again.
While compositions continue, um, um, there's more slicing happening, uh, than what we've seen in the past. So, more cautious spending, less larger projects, more smaller projects, and decision-making is slower. Uh, so that's a little bit the environment that I have the picture I've painted, uh, already in Q1, and in Q2, and we see this continuing.
with maybe the difference that
um,
As I said, the number of prospects has come up.
Quite a bit, uh, over the course of the last month and quarters. It shows that there's more activity. Um, uh and and hopefully also more Prospect for 2026 pricing, obviously, as a function of, uh, also capacity in the market.
Um, it's clear that um there has been over capacity across the market and What discovery, but it's also clear that most players are uh right now, adjusting like we're doing it. So I see this actually also uh, starting to normalize when um, demand and capacity is coming more into balance again.
[Analyst] (Bank of America): Great. Thank you. Just a quick follow-up. I wanted to actually ask about the prospects. I am wondering if you are seeing the prospects or green shoots within similar geographic regions. If there is any geography that is performing better than expected, worse than expected, if you could provide a little bit of color there. Thank you.
Great. Thank you. And then just a quick follow-up. I wanted to actually ask about the prospects. Um, I'm wondering if you're seeing the prospects or green shoots within stability. Geographic regions, if there's any geography that's performing better than expected worse than expected. If you could provide a little bit of color there, thank you.
Christian Wojczewski: That is actually the case, but depends a little bit on the sub-segment. As you know, we're less penetrating the Asian market. We've seen a little bit less dynamic in the US market earlier this year, and that has flipped more to the European market. Not very consistent and conclusive at this point in time, but there is variation.
That is, uh,
Actually.
The case, uh, but depends a little bit on the uh on on the the sub segment. Um,
As you know, we are less. Uh,
We're less uh, penetrating the Asian market. So um
we've seen a little bit less dynamic in the
um, in the US markets, uh, earlier this year and I have flipped more to the European market. So um, not very consistent and um, conclusive at this point in time but there is variation.
[Analyst] (Bank of America): Great. Thank you.
Great. Thank you.
Operator 2: The next question comes from the line of Charles Weston from RBC. Please go ahead.
The next question comes from the line of Charles Weston from RBC, please go ahead.
Christian Wojczewski: Charles.
Operator 2: Mr. Weston, your line is open. Please go ahead. Ladies and gentlemen, we lost the line with the questioner. There are no more questions at this time. I would now like to turn the conference back over to Volker Braun for any closing remarks.
Charles.
Mr. Weston
Your line is open, please go ahead.
Volker Braun: Thank you, Lorenzo, thanks to all on the call for the engaged discussion. In case you feel not all of your questions were addressed, please feel free to reach out to me anytime. We are looking forward to meeting many of you at the upcoming investor conferences in November and December. With that, we wish you a good rest of the day. Thank you and goodbye.
Ladies and gentlemen, we lost the line with the questioner. So there are no more question at this time. I will now like to turn the conference back over to worker Brown for any closing remarks.
Thank you, Lorenzo, and thanks to all of the calls for the engagement discussion. In case you feel not all of your questions were addressed. Please feel free to reach out to me any time. Uh, we're looking forward to meeting many of you at the upcoming investor conferences, in November and December. And with that, we wish you a good rest of the day. Thank you. And goodbye.