Dear ladies and gentlemen welcome to the conference call of Evotec AG. At our customers' 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. May I now hand you over to Dr. Werner Lanthaler, who will lead you through this conference. Please go ahead sir.

Welcome to our Q3 Analyst Call. Winning the race for new drug requires strong [Indiscernible] to come together. Evotec is providing the Autobahn where innovation and efficiency meet. With this, welcome again. We have uploaded a presentation for this Q3 call, which is available on the internet, and on this presentation you can follow this conference call. My name is Werner. I’m here together with my team, which you see on page number two of this presentation. Enno Spillner, our CFO; Craig Johnstone, our COO; and Cord Dohrmann, our CSO. Building and expanding this autobahn brings us together under the vision of Evotec. Research never stops until all diseases are curable. If you go to page number four of this presentation, you see, the list of recent highlight illustrates that the mega trend for External Innovation is in full play and clearly even further accelerating into 2020 and the years to come. My team will give you further insights, but here are some recent highlights. Multiple strategic drug discovery and development alliances mark Q3. The successful progress of our pipeline makes the strategy to co-own assets even more visible. Important milestones show the progress of our fully invested partnered portfolio, which consists now of more than hundred projects. Just Evotec Biologics has been a great pleasure to integrate into our Evotec family. The multi-modality of our Autobahn discovery and development platform is a key competitive advantage, which we see evolving. The extension of our iPSC platform alliance together with Celgene for another two years triggered a 30 -- a 30 million payment. Within a joint venture, together with Vifor Pharma, a new pipeline of targets will be most efficiently progressed to innovate the world of nephrology. Precision medicine has become even further reach with our initiatives in women's health with…

Yes, thank you, Werner. And a good afternoon or good morning respectively from my side. And I will now guide you through our very positive nine month or Q3 financials as Werner already indicated. On page number 10, we can report excellent numbers for first nine months of 2019 and revenues and adjusted EBITDA, both exceeding our initial budget, and these numbers confirm it will take a broad growth across all units. Revenues increased by €43 million or 16% to €321.4 million compared against the first nine months of 2018. These numbers consider the contributions from Just Evotec Biologics of €10.4 million for the third quarter of this year. Based business in general and the particular at our side and to lose carried strong revenue growth. And so overall, you can really see that all the different parts contributed to the overall revenue increase across Evotec. Gross margin improved to 30.7%. And I'll come back to the details here on the next slide. R&D expenses increased as forecasted to more than €40 million. The unpartnered R&D expenses amounted to €25.7 million. Previous year was at €16 million for comparison, and partnered R&D expenses amounted to €15.6 million, the letter being reimbursed predominantly, predominantly by our partners, Sanofi ID Lyon and under other operating income. The increase in SG&A expenses to €46.2 million is mainly based on the overall organic and strategic company growth and company staff increase, upgrading of our systems, consultancy fees in context of acquired companies like for instance, Just and equity engagements that we conducted over the year. The operating income increased from €26.3 million to €47.1 million, mainly due to the reimbursement of R&D expenses related to our ID Lyon activities as you described in the previous quarters. And the other major impact within this pin…

Thank you, Enno. And good afternoon to everyone on the call today. Together, Cord and I will update you on the scientific and operational performance. Page 15 represents EVT Execute as the highest quality sharing economy solution for our partners in drug discovery and development. By maintaining high performing and flexible access flexibly accessible platforms, our partners can tap into what they need with the highest confidence. And this is one of the core elements of the Autobahn that Werner mentioned earlier. As a result, I'm pleased to report another quarter in which we've forge new partnerships and meet scientific strides forward with existing partners. The continued strong demand and efficient utilization of our platforms has resulted in an improved gross margin of 28.3% yield today compared with 24.6% in the same period 2018. To focus on two highlights in particular, we were delighted to announce a new performance based strategic partnership with Takeda. Successful projects in this partnership will contribute to our co-owned pipeline and have the potential to attract to up to $170 million in milestones and royalties. Second, as our discovery partner for some yields, Aeovian. Aeovian pharmaceuticals recently raised $37 million in Series A to further develop the lead asset which Evotec discovered and co-invented. We're really delighted and proud that this technically challenging project has been successful in our hands, and has transitioned smoothly into development on Evotec. This scientific success attracted a milestone payment as well as an equity award. In small molecule development, the Italian regulatory body granted Verona site the license to provide commercial drug product. And this extends are offering and supplements are high quality integrated CMC service. On slide 16, you can see that we continue to enjoy a well-balanced portfolio of customers, with a very high return rate. And…

Thank you, Craig. And good afternoon to everybody on the call. Within Evotec Innovates, we combine pipeline building with high value pharma and biotech partnerships, which provide enormous financial upside for Evotec. These partnerships which come with significant co-ownership of assets are designed to provide the most effective and efficient discovery and development path, as well as eventual market access for drug candidates. Thus through these partnerships, Evotec has the opportunity to profit not only through research and development payments, but also the achievement of development and commercial milestones as well as ultimately royalties from market sales. Supported by strong Q3 numbers in 2019, we expect that Evotec Innovate will have yet another great year of highly significant growth. In the first nine months of 2019, we have made excellent progress on all fronts with a key goal to expand and accelerate our co-owned product pipeline. Most importantly, our pipeline continues to grow and progress at all stages. On page 19, we just wanted to briefly mention a few highlights. We are very excited about the signing of an early extension of Celgene neurodegeneration collaboration which started in 2016 and will now last until at least 2023. We signed a new research agreement with Celmatix through access real life data in women's health as a basis for drug discovery, but also clinical development. We formed a JV with Vifor and nephrology to jointly mine our NURTuRE, kidney disease database for new drug targets and to develop them jointly. Finally, we continue to build partnerships in the infectious disease phase, which provides significant financial support to bring highly innovative approaches in AMR, antimicrobial resistance but also other areas forward. All of these achievements support the further expansion and development of our co-owned product pipeline, which is shown on the next two…

Thank you, Craig. Thank you, Cord. Thank you, Enno. Let me round up, and give you a very positive outlook for the full year 2019 and already for 2020. Based on the current status of your order books, we can confirm the positive outlook for 2019 with group revenues to grow by approximately 15%. This outlook remains unchanged to the previous quarter, but which was increased in comparison to March 2019, when we guided for a growth of approximately 10% initially. Secondly, backed on very good Q3 results, we increased today our profitability guidance for the full year and to now expect adjusted EBITDA to improve by approximately 15% which initially was standing at above 10%. Furthermore, we confirm our guidance for unpartnered R&D expenses and expect to spend between €30 million and €40 million for the full year 2019. Our November order books are strong. Our R&D pipeline is very strong, and with this we look into very strong 2020 to come. We want to thank you for following Evotec and we want to invite you to stay with us for the years to come. With this we open up for questions.

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

Good afternoon, and thanks for taking my questions. Congrats on the extension of the Celgene neurodegeneration deal. I'm just wondering how you're going to be booking that 30 million milestone. And then also, what progress you hope to make by 2023? Is there anything you can say in terms of number of drug candidates and stage of development achieved by then? And then secondly, taking the elements of the guidance or the guidance given today considering the EBITDA and the nine months are we correct to assume a ramp in unpartnered R&D expenses in Q4? And could you possibly comment on unpartnered R&D levels in 2020? Thanks very much.

Thank you. The €30 million will be basically booked along the progression of the partnership into 2023, but it depends on how many resources we are using for which work packages which basically is progression along the science. But if you evenly distribute it, I think that gives you a good guidance. The second element of your question, I think the excitement that is behind iPSC platform is really hard to illustrate with words, because it opens doors to science which has been completely closed so far. And I think with this, you should expect in the years to come and I don't wan’t to give an exact guidance to that. iPSC derived drug candidates to enter the clinic, and I think that's then the ultimate proof for the output of this platform. And I think this is not only what we're pursuing in one indication, but this is what we're pursuing with Celgene multiple indications, with multiple drug targets, that are derived on this platform. And I think here really science guides the work packages and work packages are aligned quite effectively here. But I think it would be and not overstretched expectation to see drug candidates entering the clinic within the timeframe of the now extended collaboration, and maybe hear not only one, but multiple clinical entries should be the output of this collaboration. When it comes to the elements, so the second question elements of the guidance ramp up in Q4, I think here you should see that we are at this stage working or at full speed at multiple currently unpartnered R&D initiatives. At the same time we are completely focused on quality. So it really comes down how much capacity can be put behind the project and what does this then result in. But targeting the €30 million to €40 million R&D is the corridor where we are very comfortable to achieve that probably at the higher end. And I think that should also be a corridor, which potentially is a bit higher next year, but will not go massively higher next year. And again, that's a function of how many partnerships will be initiated next year of currently unpartnered projects, and of course how many new projects will be put on the platform. But given the capacity that we have at hand, at the quality levels where we needed, I think here if you would take current numbers and potentially increase them by 10% or 15% that's the maximum of R&D expenditure on an unpartnered level that I at this stage can foresee.

Okay, that's very helpful. Thanks Werner.

The next question is from Falko Friedrichs. Mr. Friedrichs, your line is open.

Yes, good afternoon. Thanks for taking my question. I would have three please. Firstly, you did mention a positive outlook for 2020 a few times. Could you share a bit more color on the on the indicators for that and for that assumption? Then secondly, on the Vifor Pharma deal, could you explain again how it works with your opt out rights and how flexible you are when it comes to potentially taking on costs for the clinical studies? And then thirdly on Sanofi, and the Toulouse side, could you quantify the growth you have seen that this year? And can you quickly confirm that beyond 2020 there will be no other impact event the subsidies that fall away which has been communicated? Thank you.

Question number three, will go to Craig. And question number one, just to give you a few elements that make us so excited about 2021 is that the megatrends of Precision Medicine that we have been establishing on our scientific platforms, is what drives the demand for these platforms from both sides, from Execute partnerships and also Innovate partnerships. So on all business lines, when you are hitting a mega trend, scientifically we feel that the demand for these business lines is increasing. And we see it because we have the strongest order books despite the fact that we have higher capacity than ever, into 2020. We don't quantify this at this stage, because we get full guidance by the beginning of 2020 as every year. But if you look at the numbers of recruitments that we are targeting, and if you just count on our website, this gives you a very good indication that we are looking for a lot of good talent to join Evotec. The second indicator for this should be the number of long term partnerships that we have closed in the last three years. And of course, with a long term partnership that, for example, exists with Bayer, that exists with Sanofi, that exists with Celgene, that exists with the Huntington's Disease Foundation, that exists with the Gates Foundation, that exists with multiple others. You see a full kept -- kept full utilization of the platform where there is no variability. And of course, everything that you can fully book for the full year gives you enormous security for these platforms and their capacity utilization going forward. The third element is you've seen slight situations already in the last quarters, but we are able to increase gross margins, increasing gross margins is coming from two…

Thanks, Werner. And so yes, in terms of the Sanofi, the Toulouse segment in particular. And just to remind you, we started off in 2015 with our with a partnership which we transferred around 210 employees into Evotec and today on site, that are over 550 employees. So it's from our perspective, that growth which was driven entirely by external demand, that incoming work, we considered a really fantastic success story of a conversion of a site, from one business model into another. In terms of growth over last year, in the nine months to this point, comparing to 2018 that represents approximately a 50% growth nine months during 2019 compared to nine months of 2018 same period. Just to give a sense of revenue impact, the Toulouse site has contributed something in the region of €66 million revenue in the nine months year-to-date. And we, I guess we want to remind you that of course, our partnership with Sanofi is not limited only to the Toulouse site. We have multiple interactions with Sanofi and we enjoy a very long strategic partnerships with Sanofi that go beyond 2020. Nevertheless, I can confirm that the subsidy ending in 2020 is limited entirely to the year 2020 and does not reach beyond.

Okay, thanks very much.

And maybe an additional comment. Of course, we track the performance of individual sites. Having said that, most important for us is to live our output where the whole network of Evotec comes together through the output to our partners. So therefore, the isolated view on this site is not the power of the full network that we bring to our partners and the full platform that we bring to our partners. And here, it’s a full puzzle that comes together, where Toulouse is a strategic puzzle, which is extremely important for the long term growth of Evotec.

Thank you.

Next question is from Patrick Trucchio from Berenberg. Your line is open now.

Hi, this is Iris [ph] on for Patrick. Thanks for taking the question. So just on the biologic piece, can you tell us where the build out of the J.POD manufacturing is? And if it's due on track to be completed by 2021? And then also, can you remind us how much the build out is expected to cost? And if it's trending so far within your expectations? And then lastly, can you tell us what the biological capacity of Just.Bio will be when the build out is completed? And then how should we think about this capacity expansion in terms of the potential for self-growth acceleration? Thank you.

Thank you very much, Just Evotec biologics is for us very strategic. And as I said before a fantastic addition to the family, Craig will answer your questions.

Yes, Iris. So, we are very carefully evaluating the further expansion and development of Just Evotec biologics and indeed are very carefully evaluating the construction of the first J.POD And I can confirm that the location of that J.POD will be in the Seattle area, if and when we go ahead, because the skills and the knowledge are seated there and all the knowhow, and the history is seated there, and so that transfers directly into the background knowledge that would need to be designed. And in terms of timeline, as I said, we're working very carefully through the detailed plan, we will come back with details of that before the end of the year. And in terms of capacity, of course, that's part of the evaluation is to understand how much capacity to build and at what rate.

And the capacity function leads into the CapEx transaction. And that will be concluded as a full package of work by the end of this year. And then we will give clear CapEx and cost guidance by the beginning of 2020 latest, but all we can say at this stage that all expansion that we even in the most aggressive plans can foresee, are already easily fully financed with the cash at hand at Evotec and therefore we feel very comfortable to go full speed here, without any external financing needed for anything that we plan to do there.

Okay, thank you so much.

Pleasure.

[Operator Instructions] The next question is from [Indiscernible] Your line is open now.

Thank you. [Indiscernible] Just a follow on question on just the contribution in the first full quarter now in Q3 was €10 million. If I remember correctly, you said that in 2018 full year revenues to that some $US20 million, which suggests quite steep ramp up 100% on an annualized rate if I take Q3 as a proxy, as a run rate for the for the remaining quarters. Is that fair assumption or was there any particular one-off events in Q3? So, what can we assume them for Q4 a similar number?

So, you have to first of all see again that this is a high growth market, but capacity, we can at this stage not multiply by two or even further than that, because it's high quality capacity that is delivering with interest. So, Q3 was very steep, because I think fantastic performance is one thing, but more importantly also Biocon transaction, which we have announced and where we have shown an upfront payment. Also in our books, you cannot expect such an upfront payment again in Q4 at this stage. And therefore, I would see the number on your revenue line, significantly lower than what you've seen in Q3. Nevertheless, a very strong growth via 2018. And if you assume something like a 30% to 50% growth that we see, that’s the next thing the capacity, that we have available at this stage, and that's why building capacity into 2020, 21, 22 is absolutely strategic for us within Just Evotec biologics. So, it's not limited by the market at this stage. It's limited by capacity.

Capacity, Understood. And in terms of EBITDA contribution, can we assume that it's already breaking even on that level, or even….

I would be cautious there as well, because what we see is fantastic R&D opportunities. And we would just not exploit the full potential of especially the machine learning algorithm that is available within just by combining this with our ongoing antibody initiative in the rest of the platform and within Evotec Innovate. So I think if you assume neutral EBITDA that would be already a great success, and would be ahead of plan what we had in mind when we acquired Just Evotec biologics, so we couldn't be happier than we are with this acquisition at the stage.

Very good, which in turn, implies that the margins of the based business excluding any milestones are just by -- was even stronger than what we see at first glance, right?

Yes, but also here, that's a function of at this stage high end biologics. So that's really the norm what you would see also at other high end biologics technology providers, so that would be in the norm or slightly better than the market.

Very good. Congratulations.

Thanks.

Next question is from [Indiscernible]. Your line is open Mr. [Indiscernible].

Well thank you for taking my question. Actually question was on the iPSC platform with -- and to about this technology platform and Celgene collaborations extension, I wonder will we see some additional partners in your books in the coming quarters? And to my knowledge there is a number of platforms left to fill with new partners. So a little bit light on that would be appreciated? Thank you.

I think for us, the strategy has always been to land and go deeper on certain platforms that we want to build and partnerships that we appreciate. And I think here the biggest compliment that was available to give from our partner to us was to very early on, say, we want to go deeper and broader in our neuro degeneration platform. We are very excited and very proud of our iPSC relationship that we have in the field of data cell therapy together with Sanofi. And we are investing our R&D money at this stage in broadening the iPSC platform in other biology driven areas. And giving here guidance on -- if a partner comes sooner or later would be probably premature. I think what you should see there's enormous interest and I would say also, enormous synergy with some of the partners in different disease areas where we are active. So I think it's not a question that there will be future partnerships. It's only a question when they will be there. And at this stage, I think it's also capacity driven that we really focused the capacity on high value partnerships that are already existing. And it would be hard to build very large partnerships with capacity at hand. That is fulfilling our quality criteria’s and what we typically promise to our partners. But of course, that's a major goal for 2020.

Thank you.

[Operator Instructions] Dr. Lanthaler, there are no further questions at the moment.

With this, let me invite you if you have further questions, just reach out to us. The numbers of the management team are well known to many of you. Gabby Hansen's line is open 24 hours a day as it looks. And let me think my team. Let me thank you. And I wish you all a great remainder of the day, and I hear you soon again. Bye, bye.

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