Evotec SE Reports H1 2024 Results: Challenging Year; Priority Reset for Sustainable Profitable Growth Gaining Momentum, Building on Core Strengths

Rhea-AI Summary

Evotec SE reported challenging H1 2024 results, with revenues down 7% year-on-year in Shared R&D Services. Just - Evotec Biologics showed strong growth with a 50% revenue increase. The company is implementing a priority reset for sustainable profitable growth, aiming for annualized savings of at least €40m in 2025. Key points include:

- Group revenues increased by 2% to €390.8m
- Adjusted Group EBITDA totaled €(0.5)m, impacted by high fixed costs
- New collaborations signed with various partners
- Dr Christian Wojczewski took over as CEO on July 1, 2024
- Headcount reduction of approximately 400 roles planned
- Full-year 2024 outlook: revenues expected €790-820m, adjusted EBITDA €15-35m

Positive

• Just - Evotec Biologics revenues increased by 50% to €88.5m
• New collaborations signed with Owkin, Crohn's & Colitis Foundation, Variant Bio, Bayer, CHDI, and others
• Research payments of US$70m received from Bristol Myers Squibb collaboration
• New multi-year master research collaboration with Pfizer
• Priority reset expected to achieve annualized adjusted EBITDA improvement of over €40m starting in H2 2024

Negative

• Total Shared R&D revenues decreased by 7% to €302.4m
• Adjusted Group EBITDA declined to €(0.5)m from €33.9m in H1 2023
• Headcount reduction of approximately 400 roles planned
• One-off costs of €68m recognized for priority reset measures
• Lowered full-year 2024 adjusted EBITDA guidance to €15-35m (2023: €66.4m)

Financial Analyst

Evotec's H1 2024 results reveal a challenging period with mixed performance across segments. The €390.8m group revenue represents a modest 2% growth, masking significant variations. The core Shared R&D segment saw a 7% decline, indicating market softness in early-stage R&D spending. Conversely, Just - Evotec Biologics demonstrated robust growth of 50%, highlighting a bright spot in the company's portfolio.

The adjusted EBITDA of €(0.5)m is concerning, down from €33.9m in H1 2023. This points to profitability challenges stemming from a high fixed cost base and investments in new facilities. The company's focus on cost-cutting measures, aiming for €40m in annualized savings by 2025, is a necessary step to address these issues.

While the current financials are underwhelming, the growing sales order book and new collaborations suggest potential for future revenue growth. However, investors should closely monitor the execution of the transformation programme and its impact on financial performance in the coming quarters.

Biotech Industry Expert

Evotec's results reflect broader industry trends, particularly the slowdown in early-stage R&D spending. This shift is forcing CROs to adapt their business models. The company's pivot towards integrated long-term deals and focus on biologics through Just - Evotec is strategically sound, aligning with industry direction.

The strong performance of Just - Evotec Biologics is noteworthy, indicating Evotec's successful positioning in the high-growth biologics market. The accelerated ramp-up of J.POD in Toulouse further reinforces this strategy. However, the underperformance in the core Shared R&D segment is concerning and may require more substantial restructuring.

New collaborations in areas like immunology, precision medicine and neuroscience demonstrate Evotec's continued scientific relevance. The multi-year collaboration with Pfizer is particularly promising, potentially opening new revenue streams. Overall, while facing short-term challenges, Evotec's strategic direction appears aligned with long-term industry trends.

Corporate Strategy Consultant

Evotec's new CEO, Dr. Christian Wojczewski, is initiating a critical transformation programme at a pivotal time. The priority reset towards profitable growth is essential given the current market challenges and the company's financial performance. The planned measures, including site closures, headcount reduction and optimization of the global footprint, are necessary but will require careful execution to maintain operational capabilities and employee morale.

The strategic shift towards integrated long-term deals in the Discovery segment is promising, potentially providing more stable revenue streams. The success of Just - Evotec Biologics validates the company's diversification strategy and investments in cutting-edge technologies. However, the underperformance of the core Shared R&D segment necessitates a deeper strategic review of this business model.

The one-off costs of €68m related to the reset measures are significant but necessary for long-term sustainability. Investors should expect short-term pain for potential long-term gain as Evotec repositions itself in a challenging market environment.

• Softness in market for Shared R&D Services, with H1 2024 revenues down 7% year-on-year. Continued growth of sales order book in Discovery - higher share of integrated long-term deals will improve revenue contribution beyond 2024

• Strong progress of Just - Evotec Biologics with H1 2024 revenues increase of 50% year-on-year; capacity ramp-up for J.POD in Toulouse has been accelerated

• Challenging market environment and high fixed cost base led to weaker profitability. Priority reset towards profitable growth gaining momentum

• Dr Christian Wojczewski, CEO as of 1 July, is announcing an accelerated transformation programme for the company, building on the core innovation strengths of Evotec

HAMBURG, GERMANY / ACCESSWIRE / August 14, 2024 / Evotec SE (Frankfurt Stock Exchange:EVT, MDAX/TecDAX, ISIN: DE0005664809; NASDAQ:EVO) today announced its financial results and corporate updates for the first half-year of 2024.

Dr Christian Wojczewski, Chief Executive Officer of Evotec, said: "During my first few weeks at Evotec, I have been hugely impressed by the dedication of our world-class talent base, the quality of our leading-edge technology platforms, and the deep partnerships with top pharma and biotech. We are an R&D powerhouse. Our science, our partnerships, and our people are the core strengths on which we will continue to build. However, H1 2024 revenues and profitability have been more challenging for the company than expected. We are operating in a more difficult market environment, most notably the slowdown of early-stage R&D spending. This has required us to accelerate our transformation towards sustainable profitable growth, leveraging better on our strengths, driving productivity, reducing complexity and making the organisation stronger for its next growth phase.

We have earned a high level of trust among our partners as the sales order book continued to grow in two consecutive quarters, and Just - Evotec Biologics shows excellent growth. On profitability, we have already started the first phase of our priority reset announced earlier this year, which will produce annualised savings of at least € 40 m in 2025. I have deep conviction in our ability to successfully reposition Evotec, to grow the company and deliver superior value for all stakeholders."

Softness in Shared R&D, still impacted by market environment and too high cost base; strong growth in Just - Evotec Biologics

• Group revenues increased by 2% to € 390.8 m (6M 2023: € 383.8 m)

• Total Shared R&D revenues decreased by (7)% to € 302.4 m (6M 2023: € 324.8 m), due to a challenging market environment

• Just - Evotec Biologics revenues increased by 50% to € 88.5 m (6M 2023: € 59.0 m)

• Adjusted Group EBITDA totalled € (0.5) m (6M 2023: € 33.9 m) impacted by high fixed cost base in the Shared R&D segment as well as costs related to the ramp up of the new J.POD in Toulouse, France

Strong developments in integrated R&D and precision medicine platforms

• New and extended collaborations signed with Owkin (immunology and inflammation), Crohn's & Colitis Foundation (inflammatory bowel disease), Variant Bio (fibrosis), Bayer (precision cardiology), CHDI (Huntington's disease), Inserm, Lille University Hospital and Inserm Transfert (obesity and metabolic diseases)

• Further strong progress made in strategic neuroscience collaboration with Bristol Myers Squibb ("BMS"), research payments of US$ 25 m, US$ 20 m, announced in January and June as well as US$ 25 m in July (after period-end)

• Strong progress in strategic partnership with BMS relating to building a molecular glue-based pipeline triggers payments of in total US$ 75 m (after period-end)

• Validation of Just - Evotec Biologics' strategy with new and extended agreements, e.g. with ABL, FibroGen, and the U.S. Department of Defense and expansion of tech partnership with Sandoz for development and commercial manufacturing of biosimilars (after period-end)

• New multi-year master research collaboration, including option and license agreement with Pfizer, initially focusing on early discovery research for metabolic and infectious diseases (after period-end)

Reset for profitable growth gaining momentum

• Effective 01 July 2024, Dr Christian Wojczewski took over as Chief Executive Officer ("CEO") from interim CEO Dr Mario Polywka; since 15 June 2024 Aurélie Dalbiez appointed new Chief People Officer ("CPO")

• Annual General Meeting 2024: Wesley Wheeler and Duncan McHale elected to the Supervisory Board, replacing Dr Elaine Sullivan and Dr Mario Polywka

• Reset for profitable growth on track to achieve expected annualised adjusted EBITDA improvement of over € 40 m starting in H2 2024, through

  • Exit of gene therapy and closing site of Orth, Austria

  • Closure of Chemistry activities in Marcy (Lyon, France)

  • Separation of manufacturing in Halle/Westphalia, Germany as non-core activity

  • Identified headcount reduction potential of approximately 400 roles across the global footprint

  • Reduction of physical footprint through surrendering of certain lease agreements

  • Benefits from global purchasing optimisation programme

• One-off costs related to priority reset measures of € 68 m have been recognised as of H1

Business Outlook for full-year 2024

• Group revenues¹⁾ expected in the range of € 790 - 820 m (2023: € 781.4 m)

• R&D expenditures are expected in a range of € 50 - 60 m (2023: € 64.8 m)

• Adjusted Group EBITDA¹⁾ is expected to reach € 15 - 35 m (2023: € 66.4 m)

¹⁾ Guidance including future non-core activities

More detailed information and financial tables are available in the half-year report published on the Evotec website under the following link: https://www.evotec.com/en/investor-relations/financial-publications.

Webcast/Conference Call

The Company plans to hold a conference call to discuss the results as well as provide an update on its performance. The conference call will be held in English.

Webcast details

Date: Wednesday, 14 August 2024

Time: 2.00 pm CEST (01.00 pm BST, 08.00 am EDT)

To join the audio webcast and to access the presentation slides, please register via this link.

The on-demand version of the webcast will be available on our website: www.evotec.com/en/investor-relations/financial-publications.

Conference call details

To join via phone, please pre-register via this link. You will then receive a confirmation email with dedicated dial-in details such as telephone number, access code and PIN to access the call.

A simultaneous slide presentation for participants dialling in via phone is available under this link.

About Evotec SE

Evotec is a life science company with a unique business model that delivers on its mission to discover and develop highly effective therapeutics and make them available to the patients. The Company's multimodality platform comprises a unique combination of innovative technologies, data and science for the discovery, development, and production of first-in-class and best-in-class pharmaceutical products. Evotec provides high value pipeline co-creating partnerships and solutions to all Top 20 Pharma and over 800 biotechnology companies, academic institutions, as well as other healthcare stakeholders. Evotec has strategic activities in a broad range of currently underserved therapeutic areas, including e.g. neurology, oncology, as well as metabolic and infectious diseases. Within these areas of expertise, Evotec aims to create the world-leading co-owned pipeline for innovative therapeutics and has to-date established a portfolio of more than 200 proprietary and co-owned R&D projects from early discovery to clinical development. Evotec operates globally with more than 5,000 highly qualified people. The Company's sites in Europe and the USA offer highly synergistic technologies and services and operate as complementary clusters of excellence. For additional information please go to www.evotec.com and follow us on X/Twitter @Evotec and LinkedIn.

Forward-looking statements

This announcement contains forward-looking statements concerning future events, including the proposed offering and listing of Evotec's securities. Words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "should," "target," "would" and variations of such words and similar expressions are intended to identify forward-looking statements. Such statements include comments regarding Evotec's expectations for revenues, Group EBITDA and unpartnered R&D expenses. These forward-looking statements are based on the information available to, and the expectations and assumptions deemed reasonable by Evotec at the time these statements were made. No assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of Evotec. Evotec expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Evotec's expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based.

For further information, please contact:

Media

Gabriele Hansen
SVP Head of Global Corporate Communications
Gabriele.Hansen@evotec.com

Hinnerk Rohwedder
Director of Global Corporate Communications
Hinnerk.Rohwedder@evotec.com

Investor Relations

Volker Braun
EVP Head of Global Investor Relations & ESG
Volker.Braun@evotec.com

SOURCE: Evotec SE

View the original press release on accesswire.com

FAQ

What were Evotec's (EVO) H1 2024 revenue results?

Evotec's group revenues increased by 2% to €390.8m in H1 2024, with Just - Evotec Biologics revenues up 50% to €88.5m, while Shared R&D revenues decreased by 7% to €302.4m.

How did Evotec's (EVO) profitability change in H1 2024?

Evotec's adjusted Group EBITDA declined to €(0.5)m in H1 2024 from €33.9m in H1 2023, impacted by high fixed costs in the Shared R&D segment and ramp-up costs for the new J.POD in Toulouse.

What cost-saving measures is Evotec (EVO) implementing in 2024?

Evotec is implementing a priority reset aiming for annualized savings of at least €40m in 2025, including headcount reduction of about 400 roles, site closures, and optimization of global purchasing.

What is Evotec's (EVO) revenue guidance for full-year 2024?

Evotec expects group revenues for full-year 2024 to be in the range of €790-820m, compared to €781.4m in 2023.