Ladies and gentlemen, welcome to the Evotec SE Full-Year Result 2024 Analyst Call. I am Yusuf, the Chorus Call operator. I would like to remind you that all participants will be in a listen-only mode, and that this conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] This conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Volker Braun. Please go ahead.

Thank you, Yusuf, and warm welcome to all of you following our webcast today. We will cover fiscal year 2024 results and we'll also share our 2025 guidance before we will be guiding you through the results of our strategic review process and share our mid-term outlook with you. Before we do that, it's my duty to point to the cautionary language, which you'll find on Page 2. And the second housekeeping item is to mention that this call is scheduled for up to two hours. It's now my pleasure to hand over to Christian Wojczewski, who will guide you through today's call.

Good afternoon, and thank you for taking the time to dial-in. Before we go into content, I would like to take the opportunity to welcome Paul Hitchin, our new CFO. Paul joined on March 1st, and I'm excited to see such a great CFO complimenting our Management Board. Paul and I will guide you through the presentation today. Let me first tell you how we will run this call. We will obviously cover the full-year 2024 results, and we will do this right at the beginning. We will then cover 2025. I will share our views on the current market environment, but I will also talk about the broader context in which we operate. This context will help you understand better why we are confident that Evotec will enjoy accelerated growth in 2025 and beyond. This will then lead us to our strategy review and our transformation program. We will approach this call in the same spirit I announced last time, providing clarity, a transparent approach and reliability. Reliability also means delivering on what was promised. During our Q3 2024 results call, I announced that we will conduct a thorough evaluation of our strategy, our operations, the organizational setup, and our processes. With diligence and without bias, we have concluded this evaluation, and I can reiterate what I said in November, pairing Evotec scientific excellence with operational excellence is the way forward to deliver superior and sustainable profitable growth. Evotec today can rely on very strong fundamentals, a world-class scientific team, cutting-edge technology and outstanding customer relationships. Those fundamentals have carried remarkable revenue growth in the past. We will continue to build on it. On our journey to delivering profitable growth, you will now hear us also talking about making the company stronger, not just bigger. We will address this…

Thank you, Christian, and a warm welcome from my side. Let me guide you through our full-year financials results in more detail. Our full-year 2024 group revenues reached €797 million, a 2% increase versus 2023. Our 2024 performance reflects two counterbalancing dynamics as we navigated a challenging year. Firstly, our Shared R&D revenue declined from €673 million in 2023 to €611 million in 2024 in a persisting soft market. Approximately half of the reduction stems from BMS as we saw lower revenues in 2024 versus a very strong 2023. This is only a temporary effect with a partner where we have seen very strong continued growth over recent years, and which is expected to continue in the mid-term. Looking forward, we have very strong BMS work packages and an excellent asset pipeline. In addition, we have seen a reduction in our Discovery business, where we have seen a decline in the more fast turning transactional work. On the other hand, Just-Evotec Biologics continue to grow strongly reaching €185.6 million in revenue in 2024, up from €108.4 million in 2023. This growth of 71% is driven by our strong order book of existing relationships and new deals. Our R&D spending has reduced by 26% versus prior year from €68.5 million in 2023 to €50.9 million in 2024 as we direct our investments to those most relevant for our partners. Adjusted EBITDA reached €22.6 million with profit contribution from both Shared R&D and Just-Evotec Biologics. Shared R&D contributed €12.7 million, a full-year adjusted EBITDA impacted by the softer revenues and the high fixed cost base as the full impact of the Priority Reset program will only be effective in 2025. The Just-Evotec Biologics business reached a positive full-year adjusted EBITDA of €9.9 million as the strong revenue growth compensated for the fourth…

Thank you, Paul. We see Evotec well positioned in a highly attractive, resilient and growing market with some temporary softness, so please allow me to allude to some fundamental features of our market before going into shorten trends. Just-Evotec Biologics is serving the 15 billion fast growing biologics manufacturing market. Within this space, continuous manufacturing is the emerging trend as it comes with several strong technical, operational and financial benefits over existing processes. Continuous manufacturing therefore is expected to take share in a market that is already growing 10% per year. At Evotec, as a leader in continuous manufacturing, we are shaping this new segment. With Shared R&D, we enable the biopharmaceutical industry to discover and develop drugs. Trends in global R&D spending are therefore primary influencing factors for our business. The total spending global R&D is about €260 billion. Historically, this has grown on average at mid single-digit rates, Biotech typically a bit faster, big pharma, bit slower. After having witnessed a very dynamic phase of above average funding and double-digit growth of R&D budgets triggered by COVID, fueled by zero interest rates. The market has now seen corrections in the recent years. However, the fundamental drivers remain attractive and build the basis for resilient future growth. I'd like to highlight three drivers. Firstly, the need for new drugs. The pharmaceutical industry is navigating towards a patent cliff with accumulated revenues of $200 billion of drugs losing exclusivity by 2030. The need to refill pipelines is evident. The issue has become even more pressing as pharma companies have undergone pipeline reviews and cost saving programs recently to adjust internal cost structures. The industry collectively will have to refuel the pipeline, be it biotech or pharma to generate future growth. We expect global R&D budgets to grow 3% to 4%…

As we navigate an uncertain environment, we do see growth potential and it's worth spending some time on the building blocks of our 2025 outlook. We expect the tipping point for biopharma to happen at the earliest at the end of this year, meaning our Shared R&D business will continue to experience a softer market in 2025. However, approximately one quarter of our business is exposed to the higher growth biologics market where we also benefit from existing strong strategic partnerships and new growth potential. Whilst we'll provide some more update on our first quarter in 2025 on the May 6th update, we can say that we have seen a weaker start to the year in Shared R&D. However, we've also seen a stronger start to the year from our Just-Evotec Biologics business. As mentioned earlier, our Priority Reset will lead to an additional €30 million of growth savings in 2025. Our ongoing focus on tight cost control and cost initiatives in addition to project reset are set to compensate for one-time non-recurring benefits seen in 2024. This continued focus on tight cost control remains a priority in 2025 and a new set of initiatives will launch in 2025 as part of our strategic plan, which will be outlined shortly. Whilst our focus is on a lower cost curve, we also continue to invest in growth. The opening of J.POD in France in September last year and an acceleration of manufacturing readiness for our partners requires pre-investment into OpEx for serving committed business beyond 2025. With this said, we would like to share our 2025 guidance with you. Group revenue is expected to grow 5% to 10%. That's €840 million to €880 million driven by Just-Evotec Biologics with Shared R&D revenues at broadly similar levels to 2024 given the soft…

To sum this up, after a challenging couple of quarters in 2023 and 2024, we landed the business along our guidance from summer. Our last quarter was strong in revenues and profit both for Shared R&D and Just-Evotec Biologics while we substantially improved our net debt ratio. Our turnaround continues in 2025 with revenue and profit going up in a still challenging market environment. More importantly, we are strengthening our backbone and stabilizing the business to allow us to drive operational leverage once growth and Shared R&D returns. On Just, we are committed to driving continued growth at a very high rate supported by sizable investments in our workforce in 2025. We are now opening a new chapter of our story towards profitable growth. So let us continue with a look into our strategy and the key elements of our transformation going forward. A quick reminder of our journey. In the first quarter last year, we communicated a Priority Reset for the whole company towards profitable growth. As a consequence, we've made immediate adjustments to our business to rightsize capacity and deliver €40 million of savings. The reset has been successfully concluded. In November, I then announced a strategy review. As promised, we've conducted this thoroughly with an unbiased view. We've gone very deep, unfolded our business, assessed each component of it, explored what customers really want from us, distilled the essence of our strength to come up with a very clear compelling strategy for the company and the revised financial plan. So what is it about? At Evotec, we strive for technology and science leadership in everything we do. We are pioneers in drug discovery. Together with our partners, we accelerate the journey from concept to cure. We achieved this by leveraging cutting-edge technology, disruptive science, and AI-driven innovation.…

Thank you, Christian. Our improvements in governance and performance transparency are already well underway from the formation of active transformation and commercial committees to the institution of structured CapEx approval processes. As you have seen, we have a commitment to operational excellence, and we'll be committing to a gross cost efficiency program a further €50 million between 2025 and 2028. In the immediate future, optimizing our operating model and organizational structure will provide the necessary conditions to drive our transformation and pivot to operational excellence. We have identified tangible levers to address our footprint over capacity, our inefficient processes, whilst reducing complexity within our SG&A. Over the mid-term, we'll drive further operational leverage via automation and industrialization of our operations. Our strategy will realize sizable progress in the next two to three years with a refined footprint improving gross margins, smarter SG&A and careful R&D investments, all improving profitability while sharpening our competitive edge and driving long-term growth. We firmly believe that our scientific excellence coupled with operational excellence, will translate into material value creation. The depth of our innovation and differentiated technology combined with improved focus and operational efficiency will set us on course to grow faster than the market at high single-digit or low double-digit percentage rates and to generate EBITDA margins over 20%. And with that, back to Christian to wrap-up.

So to conclude the introduction of our new strategy, we have a clear value creation plan, send around four core pillars. Firstly, above market growth rates at better quality earnings driven by our technology leadership and innovation. This will be supported by our focus on higher value generating market segments with above average growth rates and strong margins that require differentiated offerings. Secondly, we are committed to driving operational excellence. As part of this, we've launched additional optimization measures that are expected to drive more than €50 million cost out by 2028 on top of existing commitments. We are furthermore expecting additional productivity gains to continued operational leverage through to 2028 as the market recovers. Just-Evotec Biologics is a core pillar of our profitable growth. We will realize the growth commitments from existing and new partnerships while focusing on further improving the monetization of our existing technology and assets. In addition, we have a strong pipeline of assets with credible partners and significant associate milestones and royalties. Thank you. And now the Management Board and I are looking very much forward to taking your questions. Back to the operator, please start the Q&A.

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] The first question comes from Christian Ehmann, Warburg Research. Please go ahead.

Hello, everyone, and thanks for taking my question. I have a couple if you indulge me. So I would like to start, although I appreciate the global overview and then nice strategic update. I would like to start with a more local question set. So first of all, for the other operating income in 2024, obviously it was a very important point or part of your earning for 2024 with around €48 million in other income from tax credits. My question here would be, what do you think is the sustainable level of income tech or tax credits or R&D tax credits for the foreseeable future? What can we put into our model and see are there any risk to these kind of tax credits at the moment for example, in the U.K. or in France? My second question would be to the savings composition for the €50 million growth. What potential – so what are the net effects you foresee which costs do you expect to increase over the time? So what can we say? Okay, this one is actually the net effect over the next years. Then in regard to the drug portfolio expectations, so you narrowed it down to a 100 products. Could you give us a little bit more detail about the phase composition? So which ones are in clinical trials, which one are in discovery, so we can have a more granular approach to our own risk adjusted model for this kind of value? And my last question is in regards to the FDA decision. So my question would be how sophisticated are those models today? So is it really possible to really phase out animal testing over the foreseeable future in let's say four to five years? And you really get rid of the use of animals in this regard and where are the models at the moment and what can we done with it? Thank you very much.

Thank you, Christian. And I would say the first two, I'll hand over to Paul, and then number three and four to Cord Dohrmann. Shall we start with the financials?

Yes, Christian. Hi, this is Paul. Nice to meet you. So first of all, on operating income on the tax credits, you are broadly correct with your assumptions around the generation or the market generation of our tax credits. At this stage, we don't see any risks to that, and I would say that they would grow in line with our business growth and where we actually perform the work and the R&D work. And that's how we plan within our model. Your second question around the composition of the €50 million gross versus net. Maybe just to dwell on this point a little bit, I'd say a couple things. First of all, we're really pleased with the cost initiatives that we've achieved in 2024 and further committed in 2025. And as we build on those efforts and look forward to driving more productivity and cost efficiency over the planning period. So as you see on the page that we presented, we've got a full suite of levers, and the €50 million is the cost out – gross cost out beyond 2025. When you think about the gross versus net question, what I would say is over the planning period, when you consider the combination of cost out productivity inflation, you broadly get to the net €50 million that you also see on this page. I hope that answers the question. Cord, I think I'm back to you.

Yes. So let me start by – trying to address the question regarding the asset pipeline. As Christian already stated, there are currently six assets in clinical stage phases, early stages, phase one and then six preclinical stage assets. We do expect, or we do have, we do see opportunities that within the next 24 months, about 15 assets have the potential to move forward from the pre-clinic into the clinic. And then have quite a number of, or larger number of earlier stage assets that will then fill in the pipeline in the pre-clinic.

Sorry to ask again. The line broke a little bit up. So six assets in clinical stages and six T assets in preclinical stages?

Six in preclinical.

Okay. Thanks.

Yes. But over the course of the next 24 months, we have about 15 assets that could move forward in total into clinical stages. So that gives you an idea about the breadth and depths of the pipeline in discovery in at earlier stages.

So then we have got the FDA topic, animal testing, obviously a lot of noise around that. And it's fair to say that we've – it's not a new topic for us, honestly. We've been looking at this since a couple of years and talked lot less about that. But this is pretty real. Let Cord explain, what is behind that and what our activities are in this field.

So you're alluding to the FDA announcement. They announced that they intend to phase out animal testing requirements for monoclonal and antibody development, but also for other modalities.

They plan to replace current standard animal models with new alternative methodologies. And here they mentioned explicitly human microphysiological systems, which are usually cell-based models in 3D or 3D human cell-based systems. Then they also mentioned computational modeling and in particular, AI-based approaches to bio simulation. At Evotec, we not only support this initiative of the FDA, but we highly welcome this development. Evotec is really uniquely positioned to serve this developing market. At Evotec, we can bring to bear a fully integrated suite of new alternative methodologies, reaching from molecular patient data, human microphysiological systems in silico-based prediction tools, but also computational modeling. At Evotec, we have established really a broad suite of human microphysiological systems, which we can combine with sophisticated imaging, but also detailed omics space analysis, as well as AI-machine learning supported data analysis. Based on our human iPSC platform, we currently run more than 25 cell types, including liver organoid, cardiac microtissues, kidney organoids, but also newer spheres. And we are operating most of these assays in 384 web formats. These are high throughput models, and we can combine these models with high resolution, high throughput omics technologies. So in order to be clear, I want to give you an example. Evotec is absolutely leading in predicting, for example, drug-induced liver injury. This is the most common cause of liver failure, although we cover essentially all standard approaches for predicting DILI or drug-induced liver injury. Our most successful platform here is based on liver organoids in combination with omics based analysis. Whereas most competitors here with their standard platforms reached predictive accuracies of currently around 75%. Evotec’s platform reaches a predictive accuracy of over 87%, and we believe we will soon surpass 90% of predictive accuracy with our platform. To our knowledge, this is unprecedented. We are currently expanding this platform into additional areas such as cardiac, neuro, kidney, et cetera. And so we really believe that Evotec will set itself apart, especially in these areas. Thank you, Cord. And back to the operator.

Thank you.

The next question comes from Mike Ryskin, Bank of America. Please go ahead.

Great. Thanks for taking the question. I hope you guys can hear me. I've got a couple, I'll squeeze them in together. So one is on your comments on expectations for the underlying market for the rest of this year. I think you kind of pointed to some continued headwinds in the first half of the year, maybe second half a little bit better. And then you talked about, I think 5% to 7% underlying growth to 2028. Just curious sort of like what are the puts and takes on that? Thinking about, obviously tariffs may not be a huge hit, but thinking about NIH impacts in the U.S. overall biotech funding environment in the U.S. and then potential downstream impacts of things like HHS cuts, FDA cuts, how that could impact the R&D, the broader biopharma R&D universe for the next couple years. I think there's a lot of concerns there. So I'm curious, how you build up to that 5% to 7% growth. And then the second question I had was more on Evotec specifically, the cost outs you mentioned, you're taking this year. Could you just give us a little bit more color on how you're weighing those in over the course of the year? Any thoughts on timing? And then just confidence that you won't be able to cut – you won't cut too deeply and you're still going to have sufficient innovation and R&D to continue to drive revenue growth? Thanks.

Thank you, Mike. I will start and hand over also to Paul. Just on the expectation of the market. Obviously one is facts. The other is sentiment, right. When you, first of all, look at how we've built up the 5% to 7% underlying long-term growth rate for the addressable market, as alluded to, we're basically starting from the funding situation or the spending situation in biopharma. And it's fair to say, you go back in history that has always been in the range of 4%, 5%, 6% for the biopharma market. Then there was a sharp spike during COVID and the hangover effect. More recently, our prediction is that the spending in R&D, so big pharma spending, biotech will come back to this 3% to 4% range. The 5% to 7% is then the conclusion of how outsourcing will accelerate for the CRO market. So the underlying spending and obviously then the extra that comes with an increasing rate of outsourcing. Now more short-term tarrifs, NIH, FDA cuts I mentioned. We've looked at it, since quite a bit. We've sized it, and it's fair to say that the impact, this direct impact is fairly limited. Current tariff situation, we looked at it, small number, current exposure to revenues to NIH. Frankly, it's very limited. So that direct impact we assess to be small. Then the question is obviously, is there an indirect impact that might happen, for example, because university budgets academy, academic budgets get cut. There's less innovation coming from universities that is leading them in the long-term to fewer carve-outs and fewer startups in the biotech industry. That would be an indirect impact. But at this point in time, the direct impact we see as fairly manageable. Paul, any further points on the first topic and especially on the second question around cost out facing?

Yes. I think the first topic is covered, Mike. But just on the cost topic that you raise, which is I think specifically around the 2025 cost out, which is on top of the Priority Reset and excluding the €50 million that we referred to over the mid-range plan period. What I would say is, first of all, we've got very good line of sight to the cost plans that we have for 2025. It includes measures that have already been completed, such as Cologne that I refer to in the first quarter. It also includes tighter cost control and lower spend, managing headcounts and replacements through the organization. It will generally be directed towards cost of goods and SG&A and as a consequence, you see our on R&D innovation funding. We confirm the guidance around €40 million to €50 million. So again, very, very targeted in 2025. And a lot of this cost has already been identified and much of it actually executed in the first half of 2025.

Great. Thank you so much.

All right, back to Yusef.

The next question comes from Charles Weston, RBC Europe. Please go ahead.

Hello, thanks for taking the questions. Mine refer to the mid-term outlook. First of all, specific question on milestones. On Page 29 of the presentation, you gave the sort of the chart showing how much milestone might be payable each year. It looks like for 2026, if I read it, [indiscernible] appropriately, it's sort of €150 million, €200 million even in 2026, is that correct? And how much is in guidance for 2025 and outlook for 2028? And then moving on from that, if I look at 2028 and you've presented your CAGR from 2024 to 2028, what's the likely contribution from each division or what will this business potentially look like in 2028? And that's on the topline. But also could you give us a sense of the margin improvements across each of the two different divisions, and in particular, how we might get there in terms of the growth and the margin improvements over the full-year period. Is it more likely to be backend weighted, for example? Thank you.

Thank you, Charles and good to speak again. First of all, a short comment from my side and then handing over to Paul again. On Page 29, keep in mind this is a non-risk adjusted revenue line. And I've injected a small sentence. You probably also noted we've taken a conservative approach on this. Obviously this is science and first comment. There is a translation from non-risk adjusted into risk adjusted in our plan, which we've done carefully. But the other thing that I wanted to mention is obviously, you see that it is also a bumpy road here because those milestone payments can come in a year. They can come in a quarter, but they can also slip forward or back forward. So this has given you an indication. We also have given you a little bit to calculate obviously on that slide. But my first and foremost comment is that the assumption for the mid range plan is quite conservative, Paul?

Yes. I'd like to reiterate that. So whilst we see the asset opportunity as being very significant, we are cautious when we plan for the realization of that, given the potential timing volatility on those assets and the progression of the science. So when you think about the planning period, we have a relatively nominal amount for value add-ons in 2025, and that increases in 2028. But it's still a small piece of the overall revenue pie over that time period. When you look at your second question around contribution of topline for each of the divisions, I would say Christian outlined. On the Shared R&D business, we'd be looking to grow above the market rate over the planning period, and the market rate being 5% to 7%. And then the Just-Evotec Biologics business would again grow significantly above the market and reflects the realization of our backlog and existing partnerships and new deals during this period of time. So an accelerated growth rate versus the overall market indication that we've given you. In terms of your elements or your question around margin improvements for the business, we don't provide guidance for the individual segments themselves. But I would say, the following, when you think about margin expansion from the 2024 rate of about 3% to 20%, think about the following, growth and mix of the business drives about two-thirds of that expansion by which, and the cost and productivity drives about a third of that expansion. And when you think about the growth element, the Just business is driving about two-thirds of the overall growth. And when you think about the cost and productivity expansion, you see the cost effect in the earlier years and then the productivity and the automation in the later part of the years. But I think that hopefully gives you enough to model out a little bit the overall profile of the business as we see it.

Okay. Thank you very much.

Thanks, Charles. Back to Yusef, please,

[Operator Instructions] Next question comes from Smith Brendan, TD Cowen. Please go ahead.

Hi. Thanks for all the detail on the call and taking the questions. First one from us kind of expanding on a couple of the earlier questions. I did just want to ask about some of the different growth drivers over the next 12 to 18 months, let's say, for Just-Evotec Biologics business specifically and really just which among these drivers you see as more and less derisk based on your recent conversations with partners. And I guess I'm just trying to understand a little bit better the – some of the levers that you can pull internally to maintain growth there, like overall, even if partners and or the market potentially take a little longer to stabilize or cover. And then just maybe one other one to follow-up on your comments earlier about FDA's updated guidance last week on animal testing. Just wondering if you see any potential for upside to any of your assumptions this year as companies look to shift strategy and stay aligned with FDA or do you think that this is going to take a little bit longer, a little bit more time and that's maybe something that you would likely see more come into play next year? Thank you.

Yes. Absolutely. And first of all, in Just I would say we have pretty, pretty good line of sight on the Just business the next 12 months based on the commercial conversations that we have had in 2024. So the components are pretty much along the lines of what we've set before. There's obviously a pre-commitment for Sandoz, but there's also a large group of other customers which we've lined up in the last two years, which are contributing to this growth not published. Maybe there's a chance over the course of the year to make the one or other more visible. So this is pretty much already visible to us. And therefore comes with high confidence as Paul was saying. And on the FDA topic, well let me phrase it that way. We're actively using our tools already for prediction and what Cord was alluding to the whole mix towards better and faster outcome. The question is, is there an immediate tipping point? I'd be a bit careful on this. At this point in time, we don't have sufficient information how this is going to play out with the FDA.

Maybe just one comment from my end. So ultimately this is a development that we've been watching for quite some time. Evotec has been to some extent actually been pioneering sort of in bringing Omics technology sort of into the mainstream of the drug discovery process. And we've been in the past a little bit surprised about the hesitancy of using these technologies in a very concerted effort to predict efficacy and safety profiles. But we do see even ahead of the FDA announcements, we have seen continue to see an increased interest in particular by pharma companies into using these kind of technologies more extensively in the preclinical setting to select compounds for further development. And so I think this will be a very important milestone for the whole industry in that regard. But it is a little hard to predict how quickly this will translate into a significantly increased business here. I would say, we already see the first signs of it, but in order for this to materialize, we'll probably still take a few months more. But we are very optimistic with this.

Okay. Thank you very much.

You're welcome. And back to Yusef, please.

The next question comes from Joseph Hedden from Rx Securities. Please go ahead.

Good afternoon. Thanks for taking my questions. I just wondered if I could dig into a little bit more about how you are streamlining your pipeline assets. You talked in the report about high value therapeutic areas. Could you be a bit more specific about the areas of focus and perhaps what you are moving away from? And then also the focus on high value services. Does that mean that the transactional work that has really kind of suffered over the last couple of years ever since the cyber attack really? And with the weaker environment, is any of that business being discontinued or wound down? Any detail you can give on that'd be great. Thanks.

Absolutely. Maybe a Cord starts with streamlining the portfolio.

Yes. So let me start by saying, so that Christian mentioned that we cleaned up the pipeline, and I think that's a fair assessment. There were quite a few sort of historic legacy assets still in the pipeline, which have been essentially now completely removed. And the latest bit was essentially the selling of EVT 201, an asset that is wasn't very well differentiated and only sort of being pursued in the Asian markets. Everything else that we currently have in the pipeline and when I mentioned the six clinical stage assets and the six pre-clinical stage assets and a large underlying iceberg of earlier stage assets are to of the 100 assets, 70% of these are in partnership with pharma companies. And here in particular, of course, we have partnerships in the oncology space with BMS. In the neuro space, that's BMS, but in the metabolic disease space, kidney disease space, as companies such as Novo, Lilly, Bayer, Novartis, J&J and others. And so we consider these really highly innovative programs with a very high potential in sort of being differentiated turning to differentiated assets in the clinical sense. And Evotec is essentially working constantly with – we are working constantly with our partners to expand these pipelines, drive them forward together with our partners. So all of these are decisions that we are taking together with our partners. And earlier stage assets that we are driving in parts through our own R&D funding are more proof of principles points that where we can demonstrate to our partners that our platforms are highly productive. They help us to develop highly differentiated early stage assets. And very often they also serve as starting points for more strategic collaborations, where these are then basically taken up as part of the pipeline building process.

Thank you, Cord. And to the other topic on services, as I mentioned earlier, we have a full suite of services here, but we also have to unpack this a little bit because they're not all the same. They're not all having the same characteristics and dynamics. In fact, there's actually quite different dynamics in what we call Shared R&D services. So you have some, as I mentioned earlier, who we would call essentials where the ask from the customer is pretty much a standardized service at high quality, a speed of offering and so forth. Our intent here is to make sure that on the operation side, we further standardize, so that we are able to serve them at best cost. But they're also part of packages of integrated deals and strategic deals, and that's typically how we also sell them in the market. And when I'm discriminating here. I'm basically explaining that we are preferentially investing into segments with higher exposure to technology, higher exposure to differentiation potential. So to make it even more blunt and easy to understand, if I have the opportunity to invest into the next-generation of technology devices, mass specs for our mixed platform as opposed to, for example expanding our capacity in API, it's quite clear what we're going to do in future and that kind of differentiation we're now doing on a much more granular level than we've done in the past. I hope that explains a little bit, Joseph.

Yes, it does. Thanks very much.

The next question comes from Charles Weston, RBC Europe. Please go ahead.

Welcome back, Charles.

Thanks, Christian. Thanks for taking the follow-ups. Three more if I may please. First of all, on Just-Evotec Biologics, can you help me perhaps run through again, what's happening this year in terms of operating leverage here. You've got €40 million to €80 million more revenue coming through, probably not much in the way of EBITDA. So what is the right base of fixed costs? What is the revenue drop through to EBITDA once fixed costs are established, that we can think about for modern purposes? And secondly, from a group basis, it was a somewhat surprise to me about the one-off savings in 2024, which I understand. Are there any further one-off savings in 2025, which we should think about when factoring in 2026 margin improvements? And lastly, a more holistic picture. The question here, what is the synergy, if any, between the divisions? And presumably as part of your strategic review, you thought about the rationale for owning both businesses. So perhaps you could explain sort of what your thought process was there, please. Thanks.

Yes. Absolutely. Thank you for the questions. I think the first two we can take quite quickly, Paul.

Yes. Thank you. So your question, first of all, regarding the Just-Evotec business. So as you rightly say, we are continuing to invest in this business over the course of 2025 to support the commercial business we have committed. When you think about that ramp-up costs, Charles, that's made up of three elements. One is the people ramp-up. Two is the costs associated with ramp-up, whether that's consulting, IT systems, facilities, and so on and so forth. And the third element is around material costs, spend as we get, we ramp up to full production. So those three elements drive the year-over-year kind of cost dynamic. What I would say in terms of what does the cost base look like for the Just-Evotec business going forward, and what's to model. I would say that by the end of 2025, when you think about the fixed cost base for the business, you are substantially complete. So as you think about a model forward, growth, you start seeing significant operating leverage within the business. In terms of your second question, which is around the one-off savings in 2024. Short answer to this one is no further, one-offs are planned in 2025.

And then on the last topic on Just versus Shared R&D, well, consider the overall umbrella technology and science leadership enabling our partners to make their journey more successful. When you think about the Shared R&D business, as I alluded to earlier, think about Omics, think about AI that we're using, think about iPSC, think about our molecular patient database, why are we doing it? Because we're confident and we've demonstrated that this will actually make the journey for drug discovery and development more successful. Likewise, when you think about Just-Evotec Biologics, think about our investments into the cell lines, the media transfection, the vectors increasing the expression rates of our cell lines in order to make the journey more successful. At that end, you can almost say in the end on the left side, small molecules, on the right side, large molecules, right, the synergy is technology leadership to enable partners to become more successful.

Thank you.

Okay. You're welcome. Checking with Volker and Yusef, I got the impression that we're through. Yusef, can you confirm?

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Volker Braun for any closing remarks.

Thank you, Yusef, and thank you to all on the call and for your interest in Evotec for your discussions. We have the opportunity to speak again very soon in three weeks from now on the 6th of May for the release of the Q1 results. In the meantime, for any questions you may have. Feel free to reach out anytime. And we send by for the next day. So wish you [indiscernible]. So speak to you soon. Thank you.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.