Evotec SE Q1 FY2025 earnings call

• Closed exciting deals, including a protein degradation collaboration with BMS and a grant from the Korean Government for developing novel antibody treatments for lung fibrosis.
• Shared R&D market remains soft, but JEB has an expanding customer list from generic providers to big pharma and biotech, with revenue ahead of expectations.
• Leverages technology leadership via platforms like molecular patient database, iPSC, PanOmics, and PanHunter, which drive business opportunities beyond essential CRO services. For example, BMS collaborations thrive with milestone payments from successful program progress.

In Q1 2025, Evotec SE's Group revenues were €200 million. Shared R&D revenue was €140.6 million, a 4% decrease from Q1 2024's €155.2 million. Just - Evotec Biologics (JEB) revenue was €59.4 million, showing strong growth. Shared R&D contributed approximately 70.3% of total revenue (€140.6 / 200), while JEB contributed around 29.7% (59.4 / 200).

• Full year 2025 guidance: Group revenues expected to be €840 million to €880 million, R&D expenditure €40 million to €50 million, and adjusted EBITDA €30 million to €50 million.
• Midterm outlook: Average annual growth rate over the next four years expected to be in the range of 8% to 12%, with EBITDA margin exceeding 20% by 2028.

• Soft market environment in Shared R&D persists.
• Uncertainty around the impact of biotech and big pharma layoffs on CRO activities.
• Uncertainty regarding NIH funding cuts and potential tariff implications affecting manufacturing and client decisions.

Q: Given that segment performance was deviating from expectations with Shared R&D worse and JEB better, do you see the course persisting in coming months/quarters and stance on biotech layoffs impact?

A: Guidance remains unchanged. Shared R&D market is soft but no change to outlook. On layoffs, while cautious spending exists, layoffs may lead to more work being outsourced to CROs like Evotec.

Q: Color on pipeline in JEB and Shared R&D, customer concentration, and covenant/working capital?

A: Mix has changed with less concentration on super large accounts. No active financial covenants, covenant waivers until Q3 2025, with BMS payments and Just work order payments contributing to working capital improvement.

Q: Confidence in Shared R&D recovery and BMS work packages' role?

A: Market is soft but no indication of sudden change. BMS work packages are multiyear and growing, with scientific progress driving revenue profile changes.

Q: Magnitude of phasing in JEB business and remaining headcount reduction in Shared R&D?

A: Full year guidance remains, with JEB having some timing over performance in Q1. Headcount reduction includes site closure in Cologne and net attrition run rate, with full effect seen over coming quarters.

Q: Impact of FDA phasing out animal testing for biologics and Just - Biologics manufacturing shift due to tariffs?

A: Evotec is well-positioned technologically for FDA changes. Just business has inbound requests for support, with growth driven by technology rather than immediate tariff effects.