Dear ladies and gentlemen, welcome to the conference call of Evotec SE. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Werner Lanthaler, CEO, who will lead you through this conference. Please go ahead.

Good afternoon, good morning. Welcome to our Q1 reporting. It's a pleasure to have you on the phone, and it's a pleasure to guide you through our presentation acceleration on the data-driven Autobahn to Cures. When you go to this presentation, which we have uploaded on the web, and you go to Page #2, let me warmly welcome you. And given the fact that we just recently held a Capital Markets Day on April 20, we also want to invite you to look at this presentation which is also uploaded. At our Capital Markets Day we presented extensively a deeper look into our drug discovery platforms and technology, this is why today we will focus more on our ongoing business and our strong outlook for mid-term view of and the strategy. I'm here together with our CFO, Enno Spillner. If you go to Page #4 of this presentation, you will see that we have a very successful start into the year, despite the still ongoing COVID-19 pandemic, we see a strong start. Actually, it is probably fair to say that we see a very strong start into the year, which also allows us upfront to confirm our 2021 goals and also our strong long-term outlook. Page #4 highlights some single events that are supporting our unique business model. The long-term view of our business strategy has been put together in an updated business model, which we also introduced recently, which we call action plan 2025, the data-driven R&D Autobahn to Cures. When you look at Page #5 of this presentation, and you look at some of the highlighted numbers, you will see that we had like-for-like compared record start into the year, and Enno will elaborate much more in detail on this. Let me guide you back for a second…

Thank you, Werner, and truly warm welcome to all of you today. I hope you have a good morning or good afternoon. And I'm very happy to introduce you to our financial performance Q1 2021 on our next slides, and starting on Page 12. Q1 2021 numbers show a very good 11% increase on the revenue line, substantially pushed by the development of our base business. Adjusted for FX effects we even will recognize a 17% gain. I will come back to further analytics of -- and composition of our growth factors on Page 15. Gross margin amounted to 23.1% as anticipated lower than last year, but in line with expectations. This is mainly due to the often mentioned fadeout of the Sanofi subsidy for the side in Toulouse after Q1 2020 and a slightly lower level of milestone achievements. R&D expenses increased as anticipated by a strong 23% compared to last year's level, especially driven by further enhancing our multiple platforms and pushing our co-owned pipeline. The growth in the SG&A also stands at plus 23% and relates to the targeted further organic and inorganic growth like the edit new business setup of Evotec GT, the integration of the acquired biopark BBS by Sanofi and ramping up our J.POD 1 in the U.S and so on. The other operating income turns out to be slightly above last year's level and contains two main components basically as in all the last quarters, R&D tax credits and the Sanofi recharges for ID Lyon. All in all, this development results in an increase of our other operating results. With a total of €21.1 million, our adjusted EBITDA lands well within our expectations. And I will give you a more in depth overview on the EBITDA development on Page 16. The net income…

Thank you very much, Enno. Let me give you just some brief flashlights of our scientific and operational performance in Q1. If you go to Page #19, you should appreciate the picture of our iceberg of opportunities that we co-own. The vision of creating a long-term pipeline of product opportunities is growing steadily, and it's growing at fast pace. We saw a very good news flow from our partnered co-owned pipeline in Q1. But we think that with the reopening of many clinical centers, there will be even increased activity of development work within our ongoing partnerships. With this, we also think that there will be some very positive momentum towards the mid of the year and towards the second half of the year, when it comes to our co-owned pipeline, which also results into our milestones expectation. If you go to Page 20 of your presentation, you should see again the core theme of our action plan 2025. Molecular patient data is redefining health and disease. You will hear this from us over and over again because it is essential to shift the paradigm of drug discovery and drug development into the future. With our panOmics, and panHunter platforms, we have established the best data generation and also the best data analytics platform in the industry and have started to combine these platforms with multiple data sources within the community. Most of these projects are currently still ongoing within Evotec, and we have not even started to reach out to our partners. So that's why the business development process of this platform will be initiated a long action plan 2025 in the coming years. If we go to Page 21, you see that the value of data is increasing exponentially. The more data you can generate and the better…

[Operator Instructions] First question is by Ram Selvaraju of H.C. Wainwright.

Hi. This is Boobalan dialing in for Ram Selvaraju, and thanks for taking my question. I would like to ask three questions. And maybe I'll begin with the OxVax collaboration. Could you provide additional details regarding the nature of the collaboration? And do you anticipate playing the role of a strategic partner, in addition to being an investor in this? That's the first. And then second question with respect to your collaboration with BMS regarding the targeted protein degradation pathway. This is really exciting. Just few clarifying points on this front. First, why did you choose to go with the degraded strategy versus developing inhibitors that would block the functional activity of the enzyme? And secondly, [indiscernible] entire protein could cause toxicity, which may be difficult to predict in advance. So what are your thoughts on this based on your own experience? And third question with respect to EVT801, can you please remind us once again, why Sanofi chose not to proceed forward with the molecule and also what are your expectations from your current partner Kazia Therapeutics? And when do you expect clinical entry for EVT801? Thanks so much.

Thank you. Thank you for dialing in from New York City. Good morning to you, so to say. On OxVax, we are very intrigued by this academic project, which resulted in a small spinout initiative, because of the broad potential usage of iPS cell-derived elements on the platform strategy that could be complimentary to what we are doing in our iPSC world here within Evotec. So you should look at us here as an operational synergy seeking investor that is supporting and leveraging the idea behind OxVax, which of course, is perfectly leveraged through the assays that we have generated here at Evotec on our iPSC platform and what we are doing for the last 8 years on creating this induced pluripotent stem cells here. Having said that, we really look at academic findings here also to round up our iPSC platform with every potential edge that we might not have had. Having said that we believe that we have by far the most robust and best iPSC discovery and development platform in place right now in the whole industry. If you touch on our -- for more than 3 years ongoing partnership in protein degradation with BMS, it is first of all fantastic to see that BMS has extended this partnership. And it is also fantastic to see that we are using here a most comprehensive way of exploiting protein degradation molecular blues on a mass spectrometry platform, which is unparalleled in the industry. Unfortunately, coming to your question one and two, I cannot disclose any details of this collaboration, which goes beyond what we have told the public in the press release, because we never do this without the permission of our partner. So sorry about that. When it comes to EVT801, we are very happy that our partner Kazia showed fantastic scientific insight into this molecules. And with this also a very good development path forward, which we shared with them where we agreed with them and this is also the reason why we formed a partnership with them where we expect the clinical start by the end of 2021, beginning of 2022. So relatively soon, and here all preparation work for that is in place. And that's why here an optimal synergistic collaboration came together, biology and the molecule from Evotec development experience and expertise by Kazia from a molecule which came to our portfolio through the transaction, which we did about 6 years ago, when we took over the site in Toulouse including the oncology portfolio, which was still active in Toulouse and where we have progressed some of the assets forwards EVT801 is one of them, which now came into partnering stage about 5 years after we took over that molecule. With this, I hope I answered your questions, and I'm happy to take the next question.

The next question is by Christian Ehmann of Warburg Research.

Hello, and thanks for taking my question. Congratulations on a good quarter. I have a more technical one or two at least. So on the operating income, the net at least, so can we extrapolate from the current levels the -- which you have -- which are shown for Q1, can we extrapolate those for the both the whole year? Or what do you expect in the next 9 months in this regard? And my second question would be what do you think would be good investments or strategic additions to your current portfolio? Thank you very much.

Let me -- before I hand over to Enno, come to your second question by stating that when we build actual plan 2025 together, which was a company-wide effort going really bottom up into the strengths of the company that we want to build forward. We never felt as comfortable by building a strategic plan by looking at our organic platforms and building out our organic platforms. And I think here we are now starting to benefit from multiple of the add on acquisitions that we have made, starting in the year 2010, for example with a metabolics company called DeveloGen, which brought a lot of competence into this company by really building the stronghold or by acquiring Kinex on our proteomics platform, which started in there. Many iPSC protocols will be brought in and has been industrialized in the year 2012, '13, '14. So here we see now this long-term effect of small acquisitions that we made and how we completed the platform, which clearly was then into a commercial market vision, very nicely complemented by having with Aptuit, which now is our development arm for small molecules, full read through commercial material for small molecules, and with just Evotec Biologics now having not only a machine learning platform to start biologics projects, but also to build commercial material on that platform. So that really has been very, very nicely coming together now for not only all modalities, but for the whole value chain. And where, for example, within building that value chain together, we also have complemented the platform with the best safety guide, so to say, when we acquire Cyprotex for tox prediction and tox analysis on that platform. So to make a long answer short, we feel extremely comfortable with our current platform. As you see we are investing most of our resources in organic building, so that's why CapEx goes up. But building is really fundamentally driven by J.POD CapEx, which is the biggest expansion -- expenditure here. And the rest is really R&D projects where we are building on variable costs Innovate projects. Do we exclude acquisitions in the future? No, absolutely not. But again, we have never felt so comfortable with the organic investments that we're -- that we can make right now. With this -- sorry for the long answer, heading back to the operational income from Enno.

Yes. Hi, Christian. Pleasure having you on the call.

Hi.

So principle in the basic pillars that we have within these lines, which is R&D, SG&A and other operating income, which breaks down into two major blocks, which is on the other -- on the one hand side tax credits, as we have seen it in the previous years and the reimbursement from the Sanofi infectious disease unit, Lyon. So all these blocks continue and the reimbursement should be relatively stable and SG&A -- tax credits should be slightly going up over the quarters. And as we grow with the organization, we continue to grow obviously also we will have slight parallel movements also in SG&A and R&D will be relatively stable. So in principle, you can take that as a basis point you have seen in the Q1 roughly. But we obviously cannot estimate as any impairments or other activities, which may bring volatility to the whole block, if you will.

Thank you so much.

Thank you very much.

And regards to handbook -- with this, next question please.

The next question is by Falko Friedrichs of Deutsche Bank.

Thank you. Good afternoon. Three questions, please. Firstly, on the beta third line, beta cell project, and could you provide an update on the partner in process for the compound? And when can we expect the decision here? Then secondly, on data, and you mentioned it a few times in your presentation that you have this increased focus on data? Are you also thinking about or working on ways to monetize your data sets more going forward? And then thirdly, on Exscientia, it sounds like they're making a lot of progress. Will you be able to integrate some of their artificial intelligence processes into your own processes at some point? Will just remain more of an investment for you going forward?

Hello, Falko. Thank you so much for the excellent questions. Question one, on our CureBeta initiative. I think we are very happy at this stage with the progress of CureBeta and all our cell therapy initiatives. Let me also highlight here that we have increased our portfolio on cell therapies with opening a partnership with UKE on cardiomyocytes and cell therapies for cardiomyocytes. With this, we are at this stage progressing CureBeta on our own platform at full speed. Because the beauty of our own platform is that every technology and everything that we need to progress CureBeta into clinical stage at this stage is anyways happening on Evotec's platform. So independent of who would be our partner, the cells would anyways have to be made at Evotec and also scale up here would anyways have to be made at Evotec. The next piece of information, which is absolutely relevant here is that the commercial scale up process for these cells will be made within Evotec, namely just Evotec Biologics platform. So also here we see the full synergy of the platform and CureBeta as a project, which is gaining momentum every day. We are in discussion at this stage with pharma partners, and we are in discussion with venture partners, where we are considering all options at this stage, and we continue to do so which is either giving out a license, or creating a company, or keeping the project into combining it with other initiatives like the cardio initiative, still a bit longer on our platform. We have the full R&D funding behind that. And that's also I think, why we want to have the optimal solution for this project, and not only a short-term solution for the project. But most importantly, all data that has to be…

Thank you very much.

The next question is by Charles Weston of RBC.

Hello. Thanks for taking my questions, which are probably more for Enno. Three, please. First of all, you helpfully described some of the movements in EBITDA margin within EVT Execute from Q1 '21-- from Q1 2020. But could you give us why the margin dipped so much from Q3 and Q4?

Yes, Charles, you’re very hard [technical difficulty] line here.

Hold on a second. Is that better?

Yes.

Sounds better.

Thank you. Sorry about that. So, perhaps why Q1 EVT Execute margin was lower than Q3 and Q4 of last year. It clearly seems to come down to gross margin that was much lower, perhaps a bit of an explanation on that, please. Secondly, and perhaps related, could you quantify or just quantify the pre-opening and opening losses that you'd expect from a J.POD in the lead up to when it opens and in the early days before it builds much revenue? And then lastly, on Exscientia, you've obviously booked a nice uplift. The company did a Series D round in April. So will there be another valuation update in Q2, please?

Yes. Charles, pleasure to taking your questions. And let me start with the EBITDA question first. If I understand correctly, you are asking comparing Q4 of last year, basically against Q1 of this year. And maybe the additional hint that you're looking for, which makes a difference that you may recall, our Merck collaboration, which we announced in early of last year and -- for the J.POD activities in the U.S. where we received the upfront. And the respective accounting for this had been to be adjusted in context of our annual reporting, shortening the overall revenue recognition period down to 2 years coming from roughly 2.5 years, which means we had to basically adjust for the full 2020 or the quarters. Obviously, we had to recognize this in Q4 only. And that is really the main -- major differentiating factor here that makes the delta and that's what probably what you're looking for. On the …

Can I just ask [technical difficulty] appreciating a bit stronger, perhaps because of the Merck accounting, but [technical difficulty]

Charles, it's very difficult to hear you. And your question, may I direct you directly to [indiscernible] or Enno on that question, because otherwise maybe we haven't clarity on the answer here. Did you get question two and three, Enno?

Yes. So to maybe to start with the Exscientia first, on the last one, here. Yes, as we indicated also in our subsequent section basically of our Q1 report, we are expecting a further uptick in the variation of our assets in context of the second round that took place. So the Series C of Exscientia was in Q1, in March, and there's a new Series D basically happening or happened in April, which we then will adjust and report about. And with regard to the uplift, we do not expect any ramp up losses from the J.POD part, but do expect basically breakeven or slightly positive contribution immediately from the start -- from the scratch once we are getting operational.

Thank you.

Thank you, Charles. Sorry for the line and let's try to connect on a better line there. Hope to see you soon again. Next question.

The next question is by Victoria English of MedNous.

Yes. Werner, in your opening remarks, you made a general statement about the goal of the company is to create a co-owned pipeline where you own the royalties. And I was wondering whether you meant own or co-own the royalties?

So the royalties we will own, and let me just give you an example. We have in our -- at this stage, Phase 2b portfolio a compound with Bayer, P2X3, where we expect strong clinical news flow in '21, '22. This would be then, for example, the first product which could be out of that collaboration on the market in the year '24, '25. And that would be then a royalty rate, which we could collect, where there is no cost against that, and which would fall basically directly on our EBITDA line. So that's the way that's organized. And that's only one example, out of more than 100 at this stage co-owned situations. But there are also other co-owned situations. For example, when we at this stage co-own, let's say a company called Breakpoint, then we have typically not a royalty on the product, but then we have co-ownership in the company. We also have situations where we co-own a product and co-own a company. So that's why it is really the whole idea of creating the long-term royalty pool through situations where we want to benefit from the upside, and the inventive steps that we bring to products together with our partners. And if you think that through over time, then you end in a situation where you will have from multiple sources out of multiple business models, these royalties coming into the company. And then of course, the next question is how to optimally use them. But we have plans here, but we are not disclosed them yet because that's a few years to come. Importantly, within actual time 2025, we at this stage don't assume significant royalties to kick in, but that will then be beyond 2025, which again, we boost our EBITDA very nicely.

Yes. Can I just have one follow-up question. When you were talking about the role that you anticipate playing in creating new companies what you've already done some, but you were specifically talking about the bridge between academia and commercialization? Have you worked out what the ownership is of the intellectual property in these cases?

Yes. And that's super question. Thank you so much. I think that is one of the blueprints that very early on when we started the first BRIDGEs, for example, with Oxford University Lab 282, now 4 years ago, where we really spent a lot of time with the tech transfer offices with the PIs, how to handle publication strategy, how to handle tech transfer strategy, how to handle IP filing, and who at what moment in time is then benefiting from what level of ownership and how this is transferring. And the way that it works is probably best proven by the fact that this model has only not been successful now in Oxford, that we have really rolled it out to more than 10 different places where we are basically applying always the same principle. And with this, it seems to really globally work and find the satisfaction of scientists who have to publish of tech transfers, who have to file IP and us who have to have IP before we can start with drug discovery projects to then bring them into situations forward. Exact details, I cannot give you because we keep this as our BRIDGE secrets, so to say, but it's working and that's why we also think that it will not be the last BRIDGEs that you have seen.

Okay.

With this, thank you so much. Next question, please.

The next question is by Joseph Hedden of Rx Securities.

Good afternoon. Thanks for taking my questions. Similar to Victoria's in a way, on these most recent BRIDGE collaborations beLAB1407 and 2122, in terms of again, IP ownership and then who has the ultimate control, but when explicitly with these two and one with Sanofi before you have a part -- a pharma partner involved at the outset who's pumping in some significant funding. Is there a template for ownership and decision making in terms of is it going to be a spinout company, if you have an exciting program? Is it going to be licensed by the pharma partner? Can you give us any color on how your decision making process evolves?

Yes, thank you so much. To go a bit more into detail here, what one of the key aspects of this BRIDGEs really is to on the [indiscernible] costs, create data points as fast as possible and as unbiased and valid as possible. So with this the whole principle of these BRIDGEs is to create first, a blueprint, which is always the same blueprint and then create as much speed as possible with as little complication for rights as possible to come to a data point, which then gives you valid information about what should be the next step. Why do I say this, because the initial experiments that within BRIDGE project are made are typically very small first experiments. So these are typically validation experiments of academic trials that have already happened, where academic data points that have already happened. If you know here, that less than 50% of all academic experiments can be fully repeated on industrial platforms you already see that it would be a real waste to invest too much into IP protection, into licensing arrangement, into co-ownership arrangements, if you have not done the experiment first. So that's one principle here. The second principle is that there is a license then happening from the academic institution into the BRIDGE. But there are no rights to any pharma partner, even if the pharma partner would be a funding partner. But of course, the partners that are there with us have the benefit of being in the flow of information, and with this having a good discussion and a good flow of information of many of these projects, which then can lead to either venture capital formations, which we, for example, have done with a company called Dark Blue [ph], where we put several individual assets out of BRIDGE projects together into a focused company in the field of oncology then, where they can directly go into licensing transactions, which we have not shown yet, but which will also come in the future, where they can basically be projects that are simply failed on [indiscernible] costs, and then nothing has happened, which is the beauty of this BRIDGE construct. And that's why again, it is the most capital efficient translational tool in the industry. And what is the beauty -- really the beauty is that every academic partner, all of a sudden can do the experiment on the exact same platform where his ultimate exit will take place. Because Evotec is working at this stage with 20 out of the top 20 pharma companies. And of course with this experiment done on Evotec platform is already a validated data point for every future potential acquirer or licensor of such a product. And that's why here diligence of the validity of data basically falls away and gives a lot of basically momentum in a positive way for this project. So that's really the BRIDGEs in more detail. And again, you will see more of that.

Okay. Thanks for that. And then just one CureBeta, if I may. You spoke about good progress. I think previously, you stated that still needed an external partner to provide the delivery technologies for the cell therapy. Is there any update on how progress is going there?

So, we are at this stage also here developing two paths forward. One is with external devices. And we are at this stage evaluating several of device strategies on the cells. And we are also evaluating so-called cloaking technologies, which would be long-term, potentially even device less. And also here, the beauty is that all these experiments can take place and are taking place on Evotec's platform, which allows us ultimately to then pick the most valuable strategy forward. And that's ongoing as we speak.

Okay. Thank you very much.

Maybe one further piece of information. We took a co-ownership in a company last year called panCELLa, which is a company really focused on providing cloaking technologies, but also delivery technologies for cells. So there's a very good operational dialogue and potential synergy coming together here.

Okay, great. Thank you.

The next question please. Pleasure.

The next question is by Alex Cogut of Kempen.

Hi, guys. Thanks for taking my questions. I'll be brief. I was just wondering what's the latest status on iPSC candidates entering the clinic? I believe previously you mentioned you expect a neuro [ph] candidate from with BMS entering in 2021 and similarly in the diabetes program in 2022. And then just a second question on Eliapixant. If you have some updates on the clinical progress there, and what are you still expect the Phase 2b trial to be recruited in Q4 of this year in recurring costs? Thanks.

So on all three fronts, I can really give very positive news that we are still expecting our first -- it would be really fantastic. The first iPSC derived novel target in the clinic out of the iPSC more collaboration this year, middle of the year or second half of the year, but we are on full track here. So that looks very good, which will be then not only the validation of a novel target, but also really the platform behind that. We are on the cell therapy project as already mentioned evaluating many passes forward now, but they are all going towards a clinical entry as soon as possible, which definitely is not 2021. And when it comes to Eliapixant, and maybe it's also fair to say in the iPSC platform -- in the iPSC collaborations that’s not only this one target that we are bringing forward here, there's really a whole pipeline following. And that's what you should have also monitored by observing the milestones that we have generated with BMS in this iPSC collaboration. So that will be after this first target into 2022, 2023, hopefully a whole pipeline of iPSC derived targets coming. And when it comes to Eliapixant, I think we are very happy with the -- thanks, God, here opening of the clinical centers that took place despite some ongoing delays from COVID. And here really fantastic progress by our partners, they are here to push especially in refractory chronic cough, the first development candidate into the clinic and also here have a very fast recruitment. So that's also why we expect here the timelines to be unchanged for data to be generated by the second half of 2021, or beginning of '22 to then translate into Phase 3 with Eliapixant where refractory chronic cough will be the first indication. But as you know, there are at least three other indications already in preparation to go also to the market on that compound.

Yes, that's great to hear. Thank you, Werner.

Pleasure. With this, next question, please.

[Operator Instructions] There is another question by Naresh Chouhan of Intrinsic Health.

Hi, Naresh. You’re on.

Hi. Sorry. Hi, there. Thanks for taking my questions.

Sure.

Two, please. One on the cell therapy build up. Can you tell us a bit more about the technology? It's clearly huge demand, and we’ve seen some other companies drive few sales from this. But a lot of the platforms out there still require a huge amount of human intervention in the production process, a lot of cell therapies like CAR-T and that's clearly a limiting factor. Have you found a way to automate this? And you also have some of the [indiscernible] technology which is on quite a long way to doing that. So I would be interested to hear about how you think you'll be able to compete in that space. And then secondly, as biotechs are getting much better capitalized and have the ability to in-license more assets like the Kazia deal. Should we expect Evotec to be more involved in clinical development in the future where actually Evotec is now the bigger partner. That's the first part of the question. And the second part is, if that is the case, should we expect a build out of clinical development teams with a CMO and more people? Just a bit of color around how you think that part of business will grow? Thanks.

So maybe on first, the industrialization of our cell therapy platform. Here I think it's probably really fair to say that Evotec has been leading the industrialization of cell therapy scale up technologies for many, many years. And if you please ever can travel back to from London to Hamburg, be invited to see, for example, how the automated -- automatization process of our cell therapy assays has been put in place. Why is this important? Because you need consistent quality of everything that you're doing in sales before you translate this into scale up processes. That's the first point. Second point, you need stable cell lines to be available to be scaled up. And the third thing is you need manufacturing systems where you can go from smaller scale cell therapy quantities to larger scale cell therapy quantities. And here, the modular pod like system, as we have established is with our Just-Evotec Biologics technology really seems uniquely positioned to really guide this early stage, highly unbiased, but high quality process for ourselves to stabilize them, and then to scale them up into the continuous processes in the pods. So that's why we feel that also here what I mentioned today, the idea of bringing here commercial scale cell therapy project forward is for us a unique opportunity. Why is this so unique, because we also have our proprietary cell therapy products in our own hands. And if you look at only our CureBeta project, again, it is really fantastic that we don't need an outside provider now for that, but we can scale up and with this have full quality control on this process into the J.POD for that. And of course we are building this out also for multiple other partners and technologies. Also here, very interesting…

Great. Thank you.

Yes, pleasure. With this, if there are no further questions, or if there are further questions, please make a sign on your keypad. I wait because it looks like that there is no further question. With this, let me invite you to raise every question that you might have and contact us directly. We are happy to give more information where needed and where wanted. Let me thank you again for following Evotec and let me wish you the very best for your day.

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

Thank you.