Dear, ladies and gentlemen, welcome to the Evotec AG Conference Call. At our customer’s request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] May I now hand you over to the management team of Evotec and Dr. Werner Lanthaler, who will lead you through the conference. Please go ahead.

Welcome, this is Werner speaking from Evotec. Thank you for dialing into this conference call for our quarterly results. We have uploaded a presentation so that you can follow the following presentation and I hope that you are able to follow this presentation, which is available on our website. When we go to page number one of this presentation, you see a title which says, leading R&D efficiency and accelerating innovation and including at the new theme building bridges, which also tells you that today we are welcoming you to Oxford, where I am together with my management team that you see on page number two of this presentation with Enno Spillner, our CFO; with Mario Polywka, our COO' and with Cord Dohrmann, our CSO. I will guide you through this presentation together with my colleagues. If you go to page number four of this presentation, we want to highlight that it is key for us that all that we are doing is staying focus on one theme, building the best possible drug discovery platform that allows us to act as an engine of acceleration for innovation in the field where we aim. It is key, there is always the same platform that we are using this platform in different formats and two of this formats that we have established over the last years is Evotec Execute and Evotec Innovate. When you look at the first nine months of 2016, and ask the question what did we achieve so far? And here is my big pleasure to report to you that the state of the company is strong. I would actually say; the state of the company is very strong at this stage and this is reflected in both segments. Evotec Execute, where for example, we were able to build…

Thank you, Werner, and good afternoon to everyone. As Werner said, we’d like to spend the next few minutes guiding you to the Q3 performance and the first nine months, performance for the execute segment of Evotec. And Werner said, we should remind ourselves that Execute and Innovate are both segments that rely on a common technology in drug discovery platform. The Execute segment is based on standalone drug discovery services and integrated drug discovery projects that are based on the intellectual property originating from our partners, so such reveals the measures the return on investment on the platform. As you can see from slide 11, the first nine months of 2016 showed the continued strong trend in growth of revenues, up 36% compared to the same period in 2015, that’s a EUR126.6 million and this increase is driven primarily by the strong growth of the core services, very strong achievement of milestones out from our Bayer collaboration. And the full month - full nine-month contribution from Sanofi in 2016. The increase in revenue of course leads to a concomitant increase in EBITDA and that is shown in the jump of 156% to over EUR40 million nine-month EBITDA. Again, represented by strong growth in revenues but also the achievement of milestones which are greater than 2015 and also a greater operational efficiency of the platform in core business. A little more granularity to the performance of the Execute segment is shown on slide 12. The growth is driven primarily extensions and expansions of our ongoing and long standing partnerships, such as those with Genentech and Janssen. Its driven by new integrated drug discovery projects and such as the multi target that we recently signed with C4X. And then the leveraging of standalone business from the platform such as the CNS…

Thank you, Mario. It is my pleasure to give you an update on Evotec Innovate business segment. Alongside Evotec Execute, Evotec Innovate continues to thrive and expand in terms of its financial performance, academic partnerships, biotech partnerships as well as pharma partnerships. In addition, we continue to build independent startup companies either by funding them on a basis of Innovate projects as in the case of Topas Therapeutics, or via participation in the financing of biotech companies. They are using our platforms to develop their projects. However most importantly, we continue to grow our portfolio of partnered product opportunities for first-in-class product opportunities that are now starting now different product opportunities are starting to emerge in the clinic. On slide 17 Evotec shown Evotec Innovates financial performance. Overall, it continues to be on the right path with very significant growth in revenues and improved EBITDA while keeping R&D expenses essentially flat. Revenues in 2016 have grown by 26%, EBITDA has improved by 16% and R&D expenses have remained steady at $16 million during the first nine months of the year. Most importantly our pipeline of co-owned product opportunities continues to expand and advance, which is shown on the next slide. Slide 18 represents our portfolio of partnered product opportunities where we are discovering and developing potentially first-in-class product opportunities together with our partners in the areas of high unmet medical need. Our partners carry all the cost R&D costs and return for maturity stake in these projects which Evotec maintains a very significant upside in terms of development milestones in potential royalties on sales. This portfolio has grown now to over 70 product opportunities, many of them are making significant progress and development as exemplified by milestone achievement for example in our endometriosis collaboration with Bayer and the recent entry…

Thank you, Cord, and welcome everybody to the call today. I have the great pleasure of summarizing all my colleague just described on the operational level and showing you the according very positive and very strong numbers coming along side with this. So, let me start on slide number 28, and here obviously on the top line, we have very strong revenues with a significant step up compared to the first three months of 2015, coming up 37% from 88.2 million going up to 120.6 million and the reason is what mainly Mario already described to you, the revenue growth is correlated with the first full month of Sanofi contribution to our revenues, but also very strong development in our base revenues and obviously the achievement of several milestones stream cost of 2016 mainly also from - buyout repeatedly. This obviously also has a positive impact on our gross margin, which increased from 27.2% to 38.5%, where we obviously have the same major points that I just described to you showing an impact, but also early securing a higher base margin by better utilization of our in-house capacities. With regards to R&D and also with regard to SG&A, we remain fairly stable. As R&D slightly reduced due to grants that we can net against our R&D spendings and these grants have been in previous compared to 2015 and also slightly reduced R&D expenses in the field of metabolics and immune oncology due to successful partnering of assets in 2015. R&D tax credits is another point, important point which I would like to mention, I am not commenting on the one-time bargain purchase from 2015 and also on the intangible asset impairment, because we have discussed previously in other calls. With regard to other operating income, we see EUR6 million mainly…

Thank you very much. On page 32, let me summarize. We see a strong news flow of 2016 and we are not done with 2016, because there is more to come and we can already announce that. Having said that, it’s all about the long-term strategy of this company with all about the long-term plan that we are building up as Evotec. And here for 2017, we can already today give you a stronger ability of our numbers in 2017 and in due time we will of course give guidance for the full year of 2017, how we expect it to come. On page 33, of your presentation. Please as you are following this company in the past already today make notes of the dates to come in the year 2017, because we appreciate that you following this business together with us. Thank you so much, and we hand back to you for your questions.

Thank you. Now we will now begin our question-and-answer session. [Operator Instructions] The first question is from Jonas Peciulis. Your line is now open.

Hi, hello. Thank you for taking my questions and congratulations with really good results as so far. So, my first question is about Cyprotex acquisition, actually my all questions with related to acquisition, so I would like to better understand, how it fits within your organization and namely maybe what it’s - increase your capacity or it will provide a new offering to your clients, or maybe there [indiscernible] that you will get a new client list or maybe some mix of all those. Second question is, I think that Cyprotex is also involved in other markets than pharma, so is your intention to stay in other markets or you plan to service some pharma only? And last question is, are there any compounds in Cyprotex portfolio that might be picked up by Evotec Innovate? That’s all. Thank you.

Thank you, Jonas for your question. As Mario is leading the process of this acquisition, I hand over the answer for these questions to Mario.

Okay, thank you. I hope I capture everything you asked it wasn’t the best of the line that I would also refer you to our webcast till the 26th of October which detailed in a lot more detail that we can do here the acquisition. But absolutely as Werner said, Cyprotex brings to us a new line and that’s in the area of profiling admin talks in [indiscernible] profiling of compounds. And this is a capability that we do have within Evotec but at a fairly small level which we use to address pure drug discovery projects. Cyprotex have built up a fantastic industrialized platform which means we can do the profiling from probably the whole world’s requirements in terms of absorption, distribution, the capital excretion and the toxicity, so it is a substantial increase to our capability and capacity in this area it will bring with it. We anticipate significant revenues on profitability. Because all industries have that used chemical compounds that go out into the public in some form require a level now of regulatory definition and these services can be metals by what Cyprotex do and hence they have market such as agro-chemicals, fine chemicals, [indiscernible] cosmetics we will continue to serve these markets because the requirement is the same to look at the toxicity, the genotox and various other properties of chemical compounds. So, we will continue with that. Of course, the big synergy for us we feel is that reaching to the pharma market especially and then how we can leverage us to teach relationships, to bring in even more business with the Cyprotex technology and platform. It is a platform that Cyprotex brings to Evotec not internal drug assets. So, they don’t bring any compounds themselves, we will use to test our compounds and our partner's compounds.

Thank you for your question. Next question please.

Next question is from Igor Kim. Your line is open now.

Yes. Hello, everyone. Congratulations from my side on a really good fair results. I’ve got a couple of questions. The first one regarding to your 2017 outlook, you just made a general statement that you expect a very strong outlook for 2017 year, could you probably elaborate what is behind this opportunity because you have a better visibility with respect to your base business or rather amount of [indiscernible] that you’d expect? And the second question is that on your gross margin without milestone payments there of 29.4%, could we assume this margin going forward or how sustainable is that? And probably the first question on your LAB282 collaboration, could you just give a bit more details when do you expect to see first meaningful results from this joint venture? Thank you.

Thank you so much. On the visibility for 2017 what makes us optimistic for the long run is especially the quality of partnerships that we have established in the last years. And as Mario mentioned before that quality of partnerships basically indicates to us a longer-term visibility of utilization of the platform in both Evotec Execute and Evotec Innovate. At this stage, we don’t put this into numbers and I think it probably even that important to put in this numbers, it’s really about quality of the projects that we have brought on the platform, and that to a large extent also co-owned. And with this let me also remind you about our strategy, it’s the long-term co-owned building of portfolio, what is our strategy? It’s not only the sweating of assets, it’s the long-owned, co-owned of portfolio of assets. And that is really something where we see a broader and better portfolio coming and that’s also what boosts state in our focus of the strategy 2017 to increase the co-owned quality of our assets on the portfolio, it’s not the short-term sweating of assets, that is in the middle of that, that refers to your second part of the question. And how to sustain with our gross margin without milestones. I think, you see at this stage a company that has with move to lose come to a capacity utilization, which gives us growth potential to lose, which was absolutely key two years ago to find a capacity hub for us. So, we can grow and to lose and with this we can also come to larger projects because there is enough space available there. On the other hand, you see us at very high utilization rate in all other sites of Evotec and that is the function leading…

The next question is from Joseph Adam [ph]. Your line is open now.

Hi, there. Thanks for taking my questions and congrats on great Q3. Just to get on the gross margin, I am wondering if you can give us any guidance as to what you might expect in Q4. And do you see a similar kind of decay between Q3 and Q4 as 2015? And then secondly on the oncology assets with Sanofi, just on the pipeline. I think EVT-601, 701,801 preclinical at the moment. But I think will we possibly expecting some progress there around this time? Is there anything more you can say about that? Also, just like to ask about the purpose of the stem cell platform. And you kind of talking about strong focus there, but I think we haven't heard too much for a while was there anything that we might be expecting coming up soon on that. And thanks very much.

Thank you for your questions on Q4 gross margin. What we don't have at this stage is ability on milestones because they are digital events. Based on that it's difficult to give you guidance at this point on the exact gross margin that we expect with milestones on the gross margin without milestones we expect it somewhere in the similar range of what you have seen in Q3.

We certainly point out that Q3 was a very strong milestone quarter which tends to typically drive the gross margin quite high.

On the portfolio of the preclinical Sanofi as said, I ask Cord to comment and also on the IPS platform I also ask Cord to comment.

In regards to the Oncology projects that we are running together. At Sanofi, they are at in the early stages of the preclinical form of preclinical developments. These are all small molecule projects which we are excited about in particular one of these projects in the immune-oncology space it's looking very good at this point in time, but it will also take significant time to move them into the clinic. So, at the very earliest towards the end of 2017, we - entry here emergent. Others will probably take longer than that. In regards to the IPS platform, we believe that patient drive disease models are going to generate a fundamental shift in the industry in terms of how drug discovery is done and also with an impact potentially in drug profiling and stratification of patient populations in the clinic. Here we have invested and continue to invest in particular in the CNS space, particularly in the new the generation space where current models are go fully inadequate in terms of predictability for human relevance and human sense data ability. We have made great progress here in terms of industrializing this platform. And very optimistic that these types of platforms will become a main stay in the industry.

Thank you so much for your question. Next question please?

Thanks very much, Chris.

The next question is from Alex Gobat [ph]. Your line is now open

Hi, everyone. Thank you for taking my call. I just have one quick question on Cyprotex acquisition. Any incremental visibility on where that tendering of share stands? Thank you.

We at this stage are not allowed to comment on the process. Thank you for your understanding on that. but I think it was possible to announce at the initiation of our offer that more than 60% of the votes and shares have already been handed over to Evotec and our process here. So, that's why we remain very confident that the closing will be possible in 2016. With this, I hand back to next question?

The next question is from Ferca Barron [ph]. Your line is open.

Thank you for taking my questions. Most have been answered only one and half left related to Toulouse [ph]. Thank you for the slide with more details on the utilization and structure of the projects. could you provide us with a specific number of the share of the third-party projects into Toulouse [ph] at this stage and then related to that accounting question. There are provisions, long-term provisions of 26 million in your balance sheet, I guess majority of that is related to be more-and-more unlikely event of the close down into Toulouse [ph], but when by when should we see or could we see a release of this provision?

Thank you so much for your question. On the utilization of Toulouse [ph] I hand over to Mario to give you bit better feel for how we are building this on the volume side based on the initiation of Sanofi and other partners coming there. And on the accounting question I then hand back to Enno.

Okay. Thanks for the question. Ferca, this is Mario here. I think for Toulouse [ph], the majority of work is actually done for collaborations. There probably is around 10% work is based on the driving of the oncology portfolio within Sanofi, it’s a call back within the Sanofi collaboration, the rest to the nearest safe as Sanofi and probably upwards of another [indiscernible] projects have been prosecuted out of Toulouse [ph]. So, I would say the majority work has now third party, but within that, we also have a good strong innovate effort which is represent 20%, 30% of the workforce as well.

With Innovate, we referring to Evotec Innovate basically and I think that is jump start which was possible in Toulouse [ph] that it was possible to use the existing capacity for Evotec internal project as well and with this you see the current very nice buildup of the Toulouse [ph] capacity also leading to your question, which is behind accounting situation to be - think like closing down at this stage or not.

Maybe to answer that the major part of this provisions is obviously be coming from Toulouse [ph] side, but mainly to cover pensions and obligations in that regards, so not to winding down, or potential winding down.

Okay. Thank you.

Next question is from Matt Cooper [ph]. The line is open.

Hi, good afternoon everyone. A couple of questions. Just could you give some information about what are the key requirements for companies before you decide to invest them just invested in Carrick and you talked about investing some companies in LAB282. And secondly, it's been some time since you had any update on EVT-201 and 401 and when these [indiscernible].

Thank you so much for your question Matt. I think the criteria that we apply before we do anything is being first-in-class or best-in-class. If it doesn’t meet these criteria, it has nothing to do with Evotec on your platforms and that’s what our customers value that with us they go for best in-class and first in-class assets. Have vetted for us if we sometime step into a company building situation, it’s just another format of using the strategic idea of co-owning assets. So, that’s one aspect to someone has to be prepared and willing to share with us. That's one thing, second it has to fit typically on our scientific expertise and on our platform so that we truly have a better due diligence quality than anyone else on the market could have it. And with this you can make a much more informed decision and we think anyone else could do and that’s what sometimes make us also go into these company formation situations. Is there a catalog of criteria, I would say, it will be one which is established on the go because we first had to come to the situation of being able to use positive cash flows to bring into the situations and if you look back to the history of this company in the last five years, then that has not been a sustainable situation so far, that we can talk about sustainable cash flows, positive cash flows that are basically invested into the long-term strategy of accelerating this portfolio building situation. And I think, here we are always coming back to the point that we are asking at this stage our shareholders to look at this as the best long-term strategy for us creating shareholder value, by not dividend out cash from the profitability of our services at this stage, but to at least partially investing that on our Innovate platforms and also into company buildings at first which we think are likely to return superior returns than giving back the money to us. So, are we at the end of this strategy? No, we are at the beginning of this strategy and that also how you should view this. On an update on 201 in China I think, here we are very positive at this stage that our partners are fulfilling all the diligence obligations in pushing this project in the clinic forward in China under regulatory governance in China. We don’t at this stage see any effort and intents to transfer to 201 out into the Western world, so it will be a Chinese-only product. And 401 is also progressing very well in its preclinical and clinical situation, so here the candidate is going forward and we are happy with all our partners performing that can we give you later update on that unfortunately not because that’s under the governance of our partners and not for us to present at this stage. Thanks for your understanding.

Many thanks.

Next question, if there are any left?

At the moment, there are no further questions left. [Operator Instructions] There is another question coming from Mr. William Ellington [ph]. Your line is now open.

Thank you very much. I have two questions. One of them, concerns your core revenue, I see that is increased almost by EUR25 million over the first nine months, I was wondering, is this the resold of better operations with Sanofi or have you been adding other things to your core? That’s the first question. The second question relates to your pipeline; this is your propitiatory pipeline. I see that’s at least two of your projects seemed to be on hold, are you deemphasizing this your proprietary investment in any sense, what’s happening there? Thank you.

Thank you. First question I hand back to Enno, second question, I will take.

With regard to the revenue, yes, you are right. It’s major of our significant portion is coming Sanofi collaboration, but not only, but it also growth in our core base business would other clients that we are increasing and growing.

So, when you are referring to our pipeline I assume that you’re referring EVT-302, which was please be reminded the situation that about 18 months ago, Roche informed us about not meeting of the endpoint Phase IIb of this now B inhibitor on that basis and of the data, which was collected at this stage of the clinical trial, the progress of this project has been on hold since then and it’s the clear strategy of Evotec not to invest in this project alone out of our own funds, it is the joint idea to at this stage try to find a new partner for this project, but we don’t want to raise any hopes on this at this stage. And the second situation is similar, this is going to assume EVT-100 project, which we carried out together with Janssen Pharmaceuticals and again the same strategy applied Evotec alone will not invest through these assets. So, I think it’s important on top of that to mention as those are completely written off, so you can basically assume that both assets have no overhang on our balance sheet, because they are fully impaired.

Good. Thank you very much.

Pleasure. Have a good day. On that note, I wish you all a good day. Thank you very much for following Evotec and we look very much forward to hearing again to this year from you because it’s not time to say Merry Christmas at this stage. All the best.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may now disconnect now.