Evotec AG (Frankfurt Stock Exchange: EVT, MDAX/TecDAX, ISIN: DE0005664809) today reported financial results and corporate updates for the fiscal year ended 31 December 2018.
STRONG FINANCIAL PERFORMANCE
Group revenues up 42% to EUR 375.4 m (2017: EUR 263.8 m); EUR 364.0 m Revenues from customer contracts, excluding revenues from recharges according to IFRS 15
Adjusted Group EBITDA up 67% to EUR 95.5 m (2017: EUR 57.2 m); EUR 92.0 m excluding one-off effects from tax credits and receivables
Total R&D expenses of EUR 35.6 m (2017: EUR 17.6 m) including EUR 12.7 m of infectious diseases-related expenses fully reimbursed by Sanofi ('partnered R&D')
Strong strategic liquidity position of EUR 149.4 m OPERATIONAL AND SCIENTIFIC EXCELLENCE - 'EXCELLENCE SQUARED' Multiple new and extended drug discovery and development alliances INDiGO roll-out and integration of high-end CMC offering
Leading application of Artificial Intelligence ('AI') in drug discovery projects
Continued strong performance of high-throughput ADME-tox testing (Cyprotex)
Significant progress in partnered co-owned pipeline; Clinical Phase I & Phase II starts
Multiple important milestone achievements, also in iPSC-based alliances
Continued expansion of iPSC leadership and focus on patient-centric approaches
Initiation of world-leading protein degradation platform
Global roll-out and expansion of Academic BRIDGE model
Creating important footprint in infectious disease through acquisition of Evotec ID (Lyon)
Conversion into European Company (SE) expected to become effective by end of March 2019
FINANCIAL GUIDANCE 2019 - CONTINUED STRONG LONG-TERM GROWTH
Group revenues expected to increase by approx. 10% (2018: EUR 364.0 m excluding revenues from recharges according to IFRS 15)
Adjusted Group EBITDA expected to improve by approx. 10% (2018: EUR 92.0 m excluding one-off effects from tax credits and receivables)
Unpartnered research and development expenses expected to be approximately EUR 30-40 m (2018: EUR 22.9 m)
STRONG FINANCIAL PERFORMANCE
In 2018, Evotec's Group revenues increased by 42% to EUR 375.4 m (2017: EUR 263.8 m). This increase was driven primarily by the strong performance in the base business, increased milestone payments and a positive first full-year contribution from the acquired business of Aptuit (EUR 117.7 m) while contributing only EUR 46.0 m in 2017 (mid-August to December 2017). Revenues from milestones, upfronts and licences amounted to EUR 29.5 m, an increase of 6% in comparison to the previous year (EUR 27.8 m). Milestones in 2018 resulted mainly from the collaborations with Bayer in endometriosis/chronic cough and kidney diseases, and from Evotec's iPSC-based collaborations with Celgene in neurodegeneration as well as Sanofi in diabetes.
In 2018, Evotec focused its R&D expenses of EUR 35.6 m primarily on its iPSC research, projects in metabolic diseases, oncology and R&D platforms (2017: EUR 17.6 m). Furthermore, Evotec increased its R&D expenses significantly in infectious disease (ID)-related research following the acquisition of Evotec ID (Lyon) from Sanofi. These additional ID-related R&D expenses (EUR 12.7 m) are fully reimbursed by Sanofi in context of the five-year agreement and are recognised under other operating income. Thus, they are not detrimental to the operating result and the adjusted EBITDA.
In 2018, the Group's selling, general and administrative ('SG&A') expenses increased as expected by 35% to EUR 57.0 m (2017: EUR 42.4 m). This increase resulted primarily from first full-year SG&A expenses of Aptuit, additional Evotec ID (Lyon) costs as well as M&A-related and increased business development and administrative expenses in response to overall Company growth. However, this increase remained sub-proportional to revenue and adjusted EBITDA growth rates.
Evotec recorded a significant step-up in the adjusted Group EBITDA for 2018 to EUR 95.5 m (2017: EUR 57.2 m), yielding an adjusted EBITDA margin of 25.4% (2017: 21.7%). This adjusted EBITDA contains positive one-off effects from receivables and tax credits relating to prior periods in the amount of EUR 3.5 m. Without this effect, the adjusted EBITDA would amount to EUR 92.0 m.
Evotec's operating result amounted to EUR 77.5 m in 2018 (2017: operating result of EUR 36.7 m) being positively impacted by the income from bargain purchase and higher R&D tax credits as well as positive one-off effects from receivables and tax credits. In 2018, an income from bargain purchase of EUR 15.4 m was recorded for the acquisition of Evotec ID (Lyon) as the purchase price was below the net assets acquired. The Company's net result in 2018 amounted to EUR 84.1 m (2017: net result of EUR 23.2 m), being impacted by most recent acquisitions and the strong performance of the base business.
Evotec ended 2018 with a liquidity of EUR 149.4 m (2017: EUR 91.2 m), which was composed of cash and cash equivalents (EUR 109.0 m) and investments (EUR 40.4 m). The strong increase in liquidity in 2018 resulted mainly from the prepayments received from Celgene and the upfront received from Sanofi for Evotec ID (Lyon) (EUR 61 m), off-set by net loan repayments (EUR 78.2 m).
OPERATIONAL AND SCIENTIFIC EXCELLENCE - 'EXCELLENCE SQUARED' IN EVT EXECUTE & EVT INNOVATE
The EVT Execute segment demonstrated strong progress in 2018 with new and extended alliances (e.g. CHDI, C4X, Dermira, Ferring, Forge, LEO Pharma, Novo Nordisk). In 2018, Evotec was involved in more than 700 customer alliances and recorded a repeat business of 92%. Following the launch of its INDiGO services in early 2018, Evotec was able to sign multiple new INDiGO agreements with e.g. Ankar, Astex, Carna Biosciences, Inflazome, and Yumanity. The high-throughput ADME-tox testing business of Cyprotex continued its excellent performance.
In EVT Innovate, 2018 was characterised by important progress in its strategic partnerships (iPSC neurodegeneration alliance with Celgene; iPSC diabetes alliance with Sanofi; kidney disease alliance with Bayer) as well as the signing of new partnerships, e.g. two new partnerships with Celgene in oncology as well as a new partnership with Almirall in dermatological diseases. Furthermore, the Company is blending artificial intelligence ('AI') and machine-learning tools into many of its biology- and chemistry-driven platforms to further accelerate and increase effectiveness in the process and continues to place great emphasis on patient-centric approaches to drug discovery. The partnered clinical projects are progressing to plan.
In 2018, Evotec's academic BRIDGE model continued to attract significant interest from academia and industry partners.
ACQUISITION OF EVOTEC ID (LYON)
Effective 01 July 2018, Evotec acquired 100% of the shares of Evotec ID (Lyon), the former Sanofi infectious disease unit in Lyon. The collaboration resulted in an upfront payment of EUR 61 m (EUR 43 m in cash plus EUR 18 m cash of the acquired company) to Evotec. Evotec is eligible for significant further long-term funding from Sanofi in order to ensure the support and progression of a world-leading portfolio in this field.
FINANCIAL GUIDANCE 2019 - CONTINUED STRONG LONG-TERM GROWTH
Revenues, research and development expenses and adjusted EBITDA remain the financial key performance indicators of the Evotec Group.
For the financial year 2019, the Management Board expects Evotec to show Group revenue growth from contracts with customers without revenues from recharges of approx. 10%. This revenue growth is based on visibility of the current order book, expected new contracts, contract extensions and milestone opportunities. Projections are based on constant 2018 exchange rates.
Evotec's adjusted Group EBITDA from 2018 includes one-off effects associated to the business years 2016 and 2017 in the amount of EUR 3.5 m. Without these one-off effects, the adjusted Group EBITDA in 2018 would amount to EUR 92.0 m. Against this number, Evotec's adjusted Group EBITDA is expected to improve by approx. 10% in 2019 compared to 2018.
Evotec will continue to significantly invest in its own 'unpartnered' research and development (R&D) efforts to create a long-term pipeline of first-in class assets and platforms. In addition, the Company will also continue to invest in its infectious disease-related efforts. ID-related R&D expenses of approx. EUR 35 m will be completely cost-covered by its partner Sanofi ('partnered R&D'). For better comparison against previous years, Evotec will focus its guidance and reporting during the course of 2019 on the 'unpartnered R&D' part, estimated at approx. EUR 30-40 m.
FORWARD LOOKING STATEMENTS
Information set forth in this press release contains forward-looking statements, which involve a number of risks and uncertainties. The forward-looking statements contained herein represent the judgement of Evotec as of the date of this press release. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based.
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