Evotec Partnered Drug Discovery and Development - Evotec SE, Company Presentation, October 2019
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Evotec
Partnered Drug Discovery
and Development
Evotec SE, Company Presentation, October 2019
Forward-looking statement
Information set forth in this presentation contains forward-looking statements, which involve a
number of risks and uncertainties. We caution investors that forward-looking statements
contained herein are based upon management’s expectations and assumptions as of the date of
this presentation. Such forward-looking statements are neither promises nor guarantees, but are
subject to a variety of risks and uncertainties, many of which are beyond our control, and which
could cause actual results to differ materially from those contemplated in these forward-looking
statements. 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.
PAGE 1
Agenda
Overview
Partnered drug discovery & development
Financials & Outlook
PAGE 2
Leading external drug discovery & development
Company snapshot
100+ € 400 m+ € 100 m+
Co-owned pipeline Revenues1) Adjusted Group EBITDA1)
programmes with significant
milestone & royalty potential
10+ 3,000+ 200+
Co-owned companies & Top-class employees1) Long-term partnerships
corporate ventures
PAGE 3 1) In 2019 (e)
Medicine of the future comes with radical change
Technologies & mega trends
Next gen sequencing
More precise & early diagnostics
iPSC & CRISPR gene editing
Patient-centric medicine
RNAi technologies, CAR-T
Digital health
Checkpoint inhibitors & Partners
Predictive & preventive medicine
Artificial intelligence, big data
Value-based care
3D printing, blockchain,
wearables, sensors
Real-world data, …
PAGE 4
Productivity challenge increases
Development costs vs. average peak sales
Development Cost, $ m Sales, $ m
1,992
1,188
+68%
816
465
-43%
2010 2017 2010 2017
Cost per asset increased ~2/3rd since 2010 Average peak sales almost halved since 2010
PAGE 5 Source: Deloitte’s Centre for Health Solutions: A new future for R&D? Measuring the return from pharmaceutical innovation 2017
Switch from fixed to variable costs
R&D outsourcing & External Innovation
in € bn
~30-36 ~85-90 ~10
100%
90%
80% 55 5
70% (~60%) (~50%)
~7
60% (~70%)
~25
Capital (~90%) ∑
50%
Elasticity € ~150 bn
40%
30% 35 5
20% (~50%) (~50%)
~3
10% (~30%)
~3 (10%)
0%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Discovery Pre-clinical/IND Manufacturing & Clinical development Others
Not outsourced
Outsourced
PAGE 6 Source: Visiongain – Drug Discovery Outsourcing Market Forecast 2015-2025 and Evotec’s estimates
Building a co-owned portfolio
Unique strategy and business approach – Action Plan 2022
Own R&D Co-Owned
Pipeline
Action
Plan
2022
Fee for Service
PAGE 7
Integrated solutions up to IND and manufacturing
Our core competencies
Pre-
Hit Lead
Target ID/ clinical
identi- optimi- Phase I Phase II Phase III Approval Market
validation Tox
fication sation
testing
PAGE 8
Multimodality in early R&D
Small molecules, biologics & other modalities in R&D
Global pharmaceutical market1), 2)
in $ bn
CAGR
2017-22e
+7% 918
856 >50%
794
743
670 703
8%
Cell/Gene therapy
Biologics
Small molecules 5%
2017 2018e 2019e 2020e 2021e 2022e
PAGE 9 1)
Small molecules forecast from May 2017 and Biologics forecast from Dec 2017
2)Excluding sales not classified by EvaluatePharma
Source: EvaluatePharma~3,000 x unique expertise
Global centres of excellence
Abingdon, Alderley Park
~700 employees
1st
J.POD1)
Hamburg, Göttingen, Munich,
Cologne ~700 employees
Verona,
Princeton, Seattle, Lyon, Toulouse ~660 employees
Branford, Watertown ~250 ~600 employees
PAGE 10 1) 1st J.POD under construction; planned to be operational in 2020Agenda
Overview
Partnered drug discovery & development
Financials & Outlook
PAGE 11ONE fully integrated platform
EVT Execute & EVT Innovate
IP with customers IP with Evotec
PAGE 12 IP = Intellectual PropertyImproving quality and accelerating R&D
EVT Execute – Selected performance indicators
>50 >50 >10
Successful hit-finding IND – Pre-clinical & Technology acquisitions1)
campaigns each year clinical candidates
delivered (INDiGO)1)
92% 1.8 30%
Repeat business2) Years average Lower cost to safety
contract time assessment (FGLPD) than
industry benchmarks3)
PAGE 13 1) Since 2012
2) In 2018
3) Industry benchmarks disclosed in Morgan et al, NRDD, 2018 p167-181. FGLPD first good laboratory practice dose in safety assessmentFully integrated for small molecules and biologics
“The sharing Economy” for external innovation services
PAGE 14Better biologics with next generation technologies
Just – Evotec Biologics
Molecular Why Just – Evotec Biologics is unique
Design
J.MD – inventive step to product
J.MD™
Proprietary ML algorithms to design and
select optimal antibody
JP3 & J.POD – innovation in product
design and manufacturing
Process & Manufacturing Highly experienced team
Product Design Design
JP3® J.POD®
Highest Higher Flexible Highly Cost
Quality Speed Capacity Efficient
PAGE 15 1) J.POD is currently under evaluation for fastest possible initiation to build in USA and potentially also EU – expected 2021
2) Purchase of 100% of shares in Just.Bio – Evotec Biologics: Total consideration of up to $ 90 m in cash including potential earn-outs upon defined milestones expected in
2019-2022e; >$ 30 m revenues in FY 2019; approx. EBITDA break-even (Including intercompany revenues)Biologics will supplement and accelerate growth
Just – Evotec Biologics: Synergies and J.POD1) roll-out
2022ff
2020-21
2019
Roll-Out
Leverage & Cross sell Best in class end-to-end
Build
Integrated biologics biologics design, discovery
Enhance antibody discovery and development and development
technologies through AI/ML “Biologics INDIGO” Secure US and global
“Abacus”
Co-owned biologics clinical approvals for commercial
Seed Biologics pipeline pipeline manufacture
Initiate first J.POD in US Go live with first J.POD Additional J.PODs
BILL & MELINDA
GATES foundation
PAGE 16 1) J.POD is currently under evaluation for fastest possible initiation to build in USAStrong and well-balanced global customer mix
EVT Execute
in %
Foundations RoW
7 4
Mid-sized
Pharma 17
USA 36
45 Biotech Revenue
Customer
by Region
type H1 20191)
H1 20191) 60 Europe
31
Top 20 Pharma
90% of all capacities sold for 2019, and already very strong initial book building for 2020
PAGE 17 1) Third-party revenues onlyBuilding first class capacity and network for growth
Example: Toulouse history and outlook
2021/22
2019/20
2017
2015
Execute Services Integrated Execute Services
Tactical drug discovery Fully integrated drug discovery
Restructuring services, e.g. Compound services
Sanofi to support restructuring Management, Profiling and >50 customers
over 5 years DMPK, in vivo,… Innovate Initiatives
Innovate Initiatives >20 customers Multiple partnerships across
TargetBCD – Betacell T1D Innovate Initiatives multiple disease areas
TargetImmuniT with Apeiron BRIDGE „LAB301“ >10 Innovate projects access
Multiple Oncology partnerships Toulouse capacity and
Kidney partnership expertise
…
Selected Selected
Partners Partners
Employees: >200 Employees: >500 Employees: >´600
PAGE 18 1) Total commitment of approx. 250 Mio over five years – including approx. € 20 Mio subsidy ending in 2020.Fast growing portfolio of top-quality partners
EVT Execute alliances – Examples
Partnership Partnership Partnership Partnership Partnership Partnership Partnership
focused on focused covering broad focused on focused on focused focused on
Huntington on various range of DMPK services infectious on various dermatology
Disease indications services diseases indications
Initiated 2006 Initiated 2011 Initiated 2015 Initiated 2016 Initiated 2016 Initiated 2016 Initiated 2018
Partnership Partnership Partnership for Partnership Partnership Partnership Partnership
focused on focused on INDiGO, DD, focused on focused on CNS focused on focused on
diabetes & reproductive and CMC oncology oncology inflammation
obesity medicine &
women’s health Initiated 2015 and
significantly
Initiated 2018 Initiated 2018 expanded 2019 Initiated 2016 Initiated 2018 Initiated 2017 Initiated 2017
PAGE 19Building a co-owned pipeline
EVT Innovate – Selected performance indicators
7 >€ 1,000 bn >100
Disease areas of Unmet markets Co-owned pipe-
core expertise1) addressed line programmes
10 >15 100%
Clinical Co- Unpartnered large First-in-Class and best-in-
owned assets R&D initiatives class approaches “Going for
Cures not for Symptoms”
PAGE 20 1) CNS, Pain, Oncology, Respiratory, Diabetes/Metabolic diseases, Women’s health, Infectious diseaseBetter translation for better drugs
Genetics, biomarkers, and better technologies improving success
Human genetics supported targets1) Biomarker-based patient stratification2)
% success % success
~3x
~2x
All Genetically No Selection
programmes supported biomarker biomarker
PAGE 21 1) Source: Nelson et. al., Nat. Genet. 2015
2) Source: Bio: Clinical Development Success Rates 2006-2015Creating massive upside with limited cost & risk
Example for co-owned deal structures
Performance-based components (Illustrative)
Ø 8%
Ø € 200 m Milestones (MS) per project
€ 5-65 m
Upfront MS 1 MS 2 MS 3 MS 4 Clinical MS 5 MS 6 MS 7 Total Royalties
R&D cost
and/or Start
research
payments
PAGE 22>100 projects in fully invested pipeline
Partnership portfolio in small molecules
Molecule Therapeutic Area/Indication Partner Discovery Pre-clinical Phase I Phase II
EVT201 CNS – Insomnia
BAY-1817080 Chronic cough NEW data
ND1) Chronic cough
CT7001 Oncology Ph. II start
Clinical
CT7001 Oncology Ph. II start
EVT401 Immunology & Inflammation
Various Women’s health – Endometriosis
Various Women’s health – Endometriosis
Various Women’s health – Endometriosis
Various Respiratory
ND1) Oncology
ND1) Immunology & Inflammation
Pre-clinical
ND1) Pain
Various Women’s health – Endometriosis
EVT801 Oncology
TargetImmuniT Oncology – Immunotherapy
ND1) Oncology (+ several discovery programmes)
ND1) Fibrosis
Various CNS, Metabolic, Pain & Inflammation >10 further programmes
Various ND1) Nephrology
Various ND1) Immunology & Inflammation
Various ND1) Nephrology
Various ND1) Metabolic – Diabetes
Various Oncology
Various Immunology & Inflammation – Tissue fibrosis
Various Neurodegeneration
ND1) Oncology – DNA damage response NEW spin-off
Discovery
ND1) Anti-bacterial
Various All indications NEW BRIDGE
ND1) Dermatological diseases
ND1) Facioscapulohumeral Dystrophy
INDY inhibitor Metabolic
Various Fibrotic disease Fibrocor Therap. / Galapagos
TargetPicV Antiviral
Various Anti-infectives >5 programmes
Various Internal: Oncology, CNS, Metabolic, Pain & Inflammation >40 further programmes
ND1) Oncology
ND1) Novel antibiotics
ND1) Novel antibiotics
ND1) Oncology – Colorectal cancer
PAGE 23 1)
Not disclosed
Note: Several projects have fallen back to Evotec, where Evotec does not intend to run further clinical trials unpartnered, e.g. EVT302, EVT101, SGM-1019Partnering model works and delivers Phase II POC
Bayer & Evotec in chronic cough
&
POC1) in Phase II in chronic cough P2X3 – target to treat hypersensitivity in refractory chronic cough
Chronic Cough: Lasts >8 weeks
Patient characteristics:
Average age Mid 40s – Early 60s
Disease often associated with:
e.g. Asthma, COPD, lung cancer, …
Current standard of care: Unspe-
cific treatment of underlying disease
Market Size: USD 1 bn – USD 2 bn
Key Player: Merck & Co
Efficacy and very good safety profile achieved. Next milestone upon Phase III initiation.
PAGE 24 1)
Proof of concept
Source: Kwong et al 2008 AJP Lung cell Mol Physiol 295 L858-65Many more co-owned projects with great partners
EVT Innovate alliances – Examples
Oncology I Chronic kidney Oncology Fibrosis Neurodegeneration Picornavirus
disease (“CKD”)
Multi-target alliance Small molecule- Novel mechanisms iPSC-based drug Respiratory
Diabetic immunotherapies to in multi-organ fibrosis discovery indications2)
complications complement check-
point inhibitors1)
Initiated 2018 Initiated 2016 Initiated 2015 Initiated 2015 Initiated 2016 Initiated 2017
Oncology II Endometriosis/Pain Diabetes Oncology & Infectious diseases Oncology
& Respiratory iPSC Beta Cell – Respiratory
Targeted protein Open innovation Joint Venture on
degradation Non-hormonal Diabetes alliance Multi-target alliance alliance multiple targets
treatments
Initiated 2018 Initiated 2012 Initiated 2015 Initiated 2012 Initiated 2018 Initiated 2016
PAGE 25 1) Together with Apeiron
2) Together with HaplogenRe-defining the drug discovery paradigm
Game-changing platforms for better translation
Translational Comprehensive Superior
Models Profiles Analysis
iPSC PanOmics AI & ML
platform platform platform1)
PAGE 26 1) Artificial Intelligence & Machine LearningWorld-leading patient-centric initiative in nephrology
NURTuRE – Kidney disease processes, platforms and networks
Biomarker & stratification Disease-affected cell type
Patient data Human kidney-
and samples on-a-chip
Disease-
specific
Patient drugs Clinical
Centers
“The anonymised data contained within the NURTuRE biobank
has the potential to unlock answers to some of the biggest
questions about CKD and NS.”
Elaine Davies, Director of Research
Operations at Kidney Research UK
PAGE 27Patient-derived assays as new gold standard
World-leading iPSC processes and network
“IPS cells can become a powerful tool to develop new
drugs to cure intractable diseases because they can be
made from patients’ somatic cells.”
Shinya Yamanaka, Nobel prize laureate
Disease-specific drugs
Screening
Patient
Disease Patient-
in a dish specific
iPSCs
Disease-affected cell
types, i.e. neurons, …
PAGE 28 1) iPSC = Induced pluripotent stem cellsPortfolio of cell types and patient-derived cell lines
iPSC based Drug Discovery
Disease area partnerships More options for partnerships
Astrocytes / Oligodendrocytes
Neurodegenerative Disease
Neuroinflammatory / MS
Motor neurons
Dopaminergic neurons Cortical neurons
Lysosomal Storage Diseases
Cortical neurons
Microglia Kidney
Chronic Kidney Diseases / Polycystic
Kidney Disease
Diabetes Type I and II Retinal pigment epithelial cells /
Pancreatic beta cells (photoreceptors)
Retinopathies
Cardiomyocytes
Huntington Disease Cardia hypertrophy / heart failure
Cortical neurons Sensory neurons
Pain
PAGE 29From the “Valley of death“ to “Spring of life”
BRIDGEs for better academic translation and company building
Basic Applied Technology Development Product Commercialisation Market Entry &
Research Research and Demonstration and Market Development Market Volume
Funding Level Public
Market
Project
Finance
Governments Funding Gap
Banks/Credit Lines
Sponsored Research
Public Private Consortia
Industry Acquisition
Industry R&D Corporate Venture Capital
Angel Investors Venture Capital/Private Equity
Incubator Funds
PAGE 30 Source: Derived from an article by Sustainable Development Technology Canada (2013)Long-term optionality with corporate co-ownership
BRIDGEs & Equity participations – Examples
Equity Equity Equity Equity Equity Equity Consortium Spin-off
participation participation participation participation participation participation membership
Nanoparticle-
Artificial Intelli- Facioscapulo- Metabolic Fibrosis partner- Targeting Innovative mole- Kidney diseases based thera-
gence for automat- humeral muscular disorders ship with MaRS metalloenzymes cular pathways peutics
ed drug design dystrophy Innovation in oncology
Initiated 2017 Initiated 2017 Initiated 2016 Initiated 2017 Initiated 2016 Initiated 2016 Initiated 2017 Initiated 2016
Spin-off BRIDGE BRIDGE BRIDGE BRIDGE Digital BRIDGE BRIDGE
DNA damage Partnership with Partnership with Partnership with Partnership Partnership with Partnership with
response Oxford University MaRS Innovation Arix and Fred with Sanofi Sensyne Health, Integra Holdings
and OSI1) Hutch Oxford University, and Yissum
OSI1), OUI2)
Initiated 2019 Initiated 2016 Initiated 2017 Initiated 2018 Initiated 2018 Initiated 2019 Initiated 2019
PAGE 31 1) Oxford Sciences Innovation = OSI
2) Oxford University Innovation = OUIAgenda
Overview
Partnered drug discovery & development
Financials & Outlook
PAGE 32Culture to integrate talent is key for growth
Human Resources
Total operations personnel > 3,000
Chemists
~2,200
Biologists
~1,900
~870 ~ 1,000
~600
2014 2015 2016 2017 2018 2019(e)
2/3 Biologists, 1/3 Chemists
>70% of employees with at least one academic qualification
>40% of employees have worked for Evotec >5 years
>7.9 years on average drug discovery and development experience
>54% female; >60 nationalities
PAGE 33Long-term organic growth expected
Financial history 2015-2019 (e) – Selected performance indicators
Approx. 15% Group revenue growth1) (in € m) € 30-40 m unpartnered R&D expenses2) in 2019 (in € m)
364,0
263,8 22,9
18,3 18,1 17,6
164,5
127,7
2015 2016 2017 2018 2019(e) 2015 2016 2017 2018 2019(e)
>10% adj. Group EBITDA growth3) (in € m) Strong gross margin4) (in %)
92,0 35,6
31,0 29,8
27,5
57,2
36,2
8,7
2015 2016 2017 2018 2019(e) 2015 2016 2017 2018 2019(e)
1) 2018 total revenues excluding revenues from recharges according to IFRS 15
PAGE 34 2) Evotec focuses its guidance and upcoming reporting during the course of 2019 on the “unpartnered R&D” part. ID expenses will be fully reimbursed by its partner Sanofi (“partnered R&D”); total of R&D expenses in 2018 of € 35.6 m (incl. ID-related expenses)
3) Before contingent considerations, income from bargain purchase and excluding impairments on goodwill, other intangible assets and tangible assets as well as the total non-operating result; 2018 total adjusted Group EBITDA excluding € 3.5 m one-off effects in 2018
4) Gross margin in the future may be more volatile due to the dependency of receipt of potential milestone or out-licensing payments, both having a strong impact on the gross margin, also new mix of business through AptuitStrong performance across all business lines
Condensed income statement H1 2019 – Evotec SE and subsidiaries
in € m1)
H1 2019 H1 20183) % vs. 2017
Strong Gross margin
Revenues from contracts with reflects capacity utilization
207.1 178.9 16%
customers and demand
Gross margin 30.8% 28.1% – Increase in R&D as planned
One-off impairment
R&D expenses (29.3) (10.0) 192% following termination of
SG&A expenses (29.9) (27.1) 10% SGM-1019 programme
Other operating income
Impairment of intangible assets positively impacted by
(11.9) (4.2) –
and goodwill reimbursed partnered R&D
Other op. income (expenses), net 31.3 12.7 – and R&D tax credits
Adjusted Group EBITDA in
Operating result 24.0 21.7 11% H1 2019 positively affected
Adjusted Group EBITDA2) 58.2 38.6 51% by new IFRS 16 (€ 6.4 m)
Net income 10.7 17.9 (40)%
PAGE 35 1) Differences may occur due to rounding
2) Before contingent considerations, income from bargain purchase & excl. impairments on goodwill, other intangible & tangible assets as well as the total non-operating result
3) 2018 data including reclasses of recharges according to IFRS 15Strong liquidity to support growth and expansion
Liquidity development in H1 2019
in € m
(31.3) 341.8
249.1
149.4
(11.0)
(14.4)
31 Dec Operating Capex excl. Promissory Bank loans 30 June
2018 cash flow finance note (net)2) and finance 2019
leases leases and
other
PAGE 36 1) Upfront payment of purchase price for Just.Bio– Evotec Biologics - of € 55.9m / USD 60.0m after period end H1 (July 2019)
2) Promissory note volume: € 249.1 m net; 3, 5, 7 & 10 years with a fixed and variable interest rate of on average below 1.5%; non-dilutive but debtStrong team and shareholders for innovation
Management & shareholder structure*
̴ 9% Roland ̴ 9% Goldman
Oetker/ROI Sachs >5% Morgan Management Board Supervisory Board
Stanley
Werner Lanthaler (CEO) Wolfgang Plischke
Long-time experience in Ex-Bayer
>3% AGI1)
Pharma & biotech
Iris Löw-Friedrich
Cord Dohrmann (CSO) UCB
>3% DWS2)
Long-time experience in
drug discovery Mario Polywka
Consultant
Craig Johnstone (COO)
Strong drug discovery and Roland Sackers
commercial track record QIAGEN
̴ 10% Novo
Holdings A/S
Enno Spillner (CFO) Michael Shalmi
Long-time experience in Consultant
̴ 56% Free float ̴ 1% Management finance & biotech
Elaine Sullivan
Carrick Therapeutics
Number of shares: 150.6 m
Listing: Frankfurt Stock Exchange (MDAX, TecDAX), OTCBB
52 week high/low: € 27.29/€ 16.02
* All stated shareholdings comprise the total of voting rights attached to shares and instruments
PAGE 37 1) Allianz Global Investors GmbH
2) DWS Investment GmbH, formerly Deutsche Asset Management Investment GmbHStrong year – and more to come
Expected key milestones 2019
Continued strong growth and new integrated service alliances
New co-owned partnerships from own R&D
New clinical initiations & important progress of co-owned pipeline
Important milestones from existing alliances
Initiation of new BRIDGEs
Corporate investing initiatives
PAGE 38Strong financial performance ahead
Updated Guidance 2019 (14th August 2019)
Double-
Approx. 15% (previously: approx. 10%) growth in Group revenues from
1 digit top-
contracts with customers without revenues from recharges1)
line growth
Profitable Adjusted Group EBITDA2) expected to improve by more than 10%
2 and growing (previously: approx. 10%) compared to € 92.0 m in 20183)
Focused
3 unpartnered Unpartnered Group R&D expenses of € 30-40 m4)
investments
PAGE 39 1) 2018 total revenues excluding revenues from recharges according to IFRS 15: € 364.0 m / Based on current/updated FX rates
2) Before contingent considerations, income from bargain purchase & excl. impairments on goodwill, other intangible & tangible assets as well as the total non-operating result
3) 2018 total adjusted Group EBITDA excluding € 3.5 m one-off effects in 2018: € 92.0 m
4) For better comparison to previous years, Evotec focuses its guidance and upcoming reporting during the course of 2019 on the “unpartnered R&D” part. ID-related R&D expenses will be fully reimbursed by its partner Sanofi
(“partnered R&D”).Your contact: Dr Werner Lanthaler Chief Executive Officer +49.(0).40.560 81-242 +49.(0).40.560 81-333 Fax werner.lanthaler@evotec.com
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