EVOTEC SE REPORTS FIRST HALF-YEAR 2020 RESULTS AND CORPORATE UPDATES
DGAP-News: Evotec SE
/ Key word(s): Half Year Results
OVERALL POSITIVE FINANCIAL PERFORMANCE REFLECTING GROWTH ACROSS ALL BUSINESS LINES
1) Thereof unpartnered R&D expenses of € 21.6 m in H1 2020 (H1 2019: € 18.7 m)
Thereof, base revenues accounted for € 223.2 m, an increase of 19% over the same period of the previous year (H1 2019: € 188.0 m), while revenues from upfront, milestone and licence payments decreased to € 7.8 m (H1 2019: € 19.1 m).
Due to the significant lower upfront, milestone and license payments as well as the anticipated expiring payments from Sanofi for the Toulouse site from April 2020 onwards, gross margin decreased to 23.0% (H1 2019: 30.8%).
In the first half-year of 2020, Evotec continued to strongly invest into its unpartnered R&D. Thus, the expenses for unpartnered R&D increased to € 21.6 m (H1 2019: € 18.7 m), mainly due to intensified research investments into oncology and platforms such as PanOmics and cell therapy. The lower partnered R&D expenses of € 8.2 m (H1 2019: € 10.6 m) were primarily related to the infectious disease portfolio. Whereas costs of the partnership with Sanofi in this area are predominantly reported as R&D expenses the full reimbursement by Sanofi is recognised under other operating income. Total R&D expenses of € 29.8 m nearly remained stable compared to 2019 (H1 2019: € 29.3 m).
The Group's selling, general and administrative ("SG&A") expenses for the first half-year of 2020 increased by 22% to € 36.5 m (H1 2019: € 29.9 m), which mainly resulted from the overall staff increase and the related costs as well as from transaction and integration cost from equity engagements, the consolidation of Just - Evotec Biologics and the founding of Evotec GT.
Other operating result in the first six months of 2020 amounted to € 32.2 m (H1 2019: € 31.3 m) and was mainly influenced by R&D tax credits as well as recharges of Sanofi for ID Lyon. Due to a change in the tax regulations in Italian legislation, total R&D tax credits grew less as expected compared to prior period.
The operating income decreased to € 18.9 m (H1 2019: € 24.0 m), mainly due to the significantly lower upfront, milestone and licence revenues. Most of the half-year milestones are expected to be only slightly delayed, but not lost.
The lower upfront, milestone and licence revenues also affected the adjusted Group EBITDA which decreased by 19% to € 47.3 m (H1 2019: € 58.2 m). Favourable exchange rate developments had a positive impact of approx. € 1.7 m on the adjusted Group EBITDA.
The net result in the first half-year of 2020 amounted to € 7.3 m (H1 2019: € 10.7 m).
Evotec's liquidity position in the first six months of 2020 continued to remain robust amounting to € 275.7 m (31 December 2019: € 320.0 m). The cash-outflow resulted mainly from the high investments in capex and equity investments.
In the first half of 2020, the EVT Execute segment continued its strong progress of the previous quarters.
Evotec signed multiple new drug discovery and development agreements, e.g. with Boston Pharmaceuticals and Ildong, as well as multiple undisclosed partners and extended or expanded existing long-term agreements (e.g. with Amgen, Takeda). Evotec's wholly-owned US subsidiary Cyprotex was again selected by the US Environmental Protection Agency (EPA) as its preferred service partner for the next five years. The contract is worth up to $ 13 m.
Evotec's fully-owned subsidiary Just - Evotec Biologics had a successful start with the J.POD(R) construction, progressing well, and its first J.POD(R) collaboration with MSD for the development of innovative technologies for the production of biologics of the highest quality. Further multiple new agreements were concluded (e.g. with ABL, Ology). After period-end, Just - Evotec Biologics entered into a partnership with the U.S. Department of Defense to develop and manufacture monoclonal antibodies (mAbs) for treatment and/or prevention of COVID-19. The contract with the DOD values up to $ 18.2 m.
Also, the Evotec Development Business showed very good performance and started strategic initiatives in the first half-year 2020, despite the extraordinary difficult circumstances especially at the Evotec site in Verona. In June 2020, Evotec's long-term partner Zogenix received its marketing approval from FDA for the company's drug FINTEPLA(R) for Dravet & LGS syndromes, securing 7-year orphan drug exclusivity for commercial exploitation in the US. Evotec will continue to be the commercial manufacturing partner of Zogenix.
In its second segment, EVT Innovate, Evotec was also very successful within the first half-year 2020.
Evotec expanded its leading position in iPSC (Induced pluripotent stem cells). After having regained the global development and commercialisation rights of the iPSC-based diabetes cell therapy programme from Sanofi, Evotec intends to move this programme forward within its QRbeta initiative. Multiple other unpartnered iPSC based initiatives showed very good progress in the first half-year 2020 (e.g. Retinal Diseases).
Evotec's long-term partner, Bayer AG, continues to advance its P2X3 antagonist BAY1817080, an asset originating from Evotec. The Phase IIa-PoC study had a positive outcome in patients with refractory chronic cough. Preparations for a Phase-IIb study in patients with refractory chronic cough are ongoing, as are preparations for further studies in additional indications.
Together with Samsara, Biocapital and KCK Evotec initiated "Autobahn Labs", a novel virtual early stage drug discovery incubator (BRIDGE) to design and execute an accelerated path to deliver transformational new therapies. Autobahn Labs already entered into a first-of-a-kind strategic collaboration with UCLA Technology Development Group to identify and advance the most promising areas of research.
Over the first half of 2020, Evotec continued to expand its strategy of generating upside through equity investments, e.g. in leon-nanodrugs, QUANTRO Therapeutics and Exscientia. Other equity participations were made as follow-on investments (e.g. Carrick) or small seed commitments (e.g. Cajal Neuroscience).
IMPORTANT STRATEGIC BUSINESS EXPANSION INTO NEW MODALITIES AND MARKETS
A very important step towards Evotec's long-term vision of becoming a fully modality-agnostic drug discovery and development partnership company was the establishment of the new site Evotec GT in Austria, dedicated to research and development of gene therapy-based projects. In April, Evotec GT signed a long-term research alliance with Takeda covering selected Takeda gene therapy projects for core therapeutic areas like oncology, rare diseases, neuroscience and gastroenterology.
In June 2020, Evotec signed a strategic partnership with Secarna Pharmaceuticals in the field of Antisense Therapy and already initiated a first project with the aim to establish a pipeline of co-owned antisense oligonucleotide therapies.
Already in the first quarter of 2020, Evotec entered into the field of formulation nanotechnology by signing a strategic partnership with the Munich-based company leon-nanodrugs.
In May, Kara Carter, Executive Vice President Infectious Disease of Evotec, was appointed as President of the International Society of the Antiviral Research (ISAR).
Shortly after period-end, on 01 July 2020 Evotec acquired the "Biopark By Sanofi SAS" in Toulouse including all land and buildings of the Sanofi site. The acquisition will allow Evotec to significantly expand its existing capacities at its Toulouse site and to secure further, long-term growth of its Toulouse-based operations. The site will be rebranded into "Campus Curie Toulouse".
FINANCIAL GUIDANCE 2020
At present, the management of Evotec confirms the financial guidance published in the 2019 Annual Report on 26 March 2020 and confirmed in the Q1 Quarterly Statement on 14 May 2020 with regard to revenues and adjusted EBITDA.
Due to additional very promising investments in innovative technology platforms and development candidates in EVT Innovate, Evotec plans to invest even more in research and development. For this reason, the forecast for "unpartnered R&D" has been raised from previously approx. € 40 m to now approx. € 45 m.
1) EBITDA is defined as earnings before interest, taxes, depreciation, and amortisation of intangibles. Adjusted EBITDA excludes contingent considerations, income from bargain purchase and impairments on goodwill, other intangible and tangible assets as well as the total non-operating result
2) Projections are based on constant 2019 exchange rates
3) Despite increased R&D investments, the expected loss of the Sanofi payments for the Toulouse site after Q1 2020 and significantly ramping up the Just - Evotec Biologics business by investing in and building highly innovative J.POD(R) capacities in the USA
The Company is going to hold a conference call to discuss the results as well as to provide an update on its performance. Furthermore, the Management Board will present an outlook for the fiscal year 2020. The conference call will be held in English.
Conference call details
A simultaneous slide presentation for participants dialling in via phone is available at https://webcasts.eqs.com/evotec20200812/no-audio
A replay of the conference call will be available for seven days after the conference and can be accessed in Europe by dialling +49 69 20 17 44 222 (Germany) or +44 20 3364 5150 (UK) and in the USA by dialling +1 844 307 9362. The access code is 315597273#. The on-demand version of the webcast will be available on our website: https://www.evotec.com/financial-reports.
FORWARD LOOKING STATEMENTS
12.08.2020 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
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