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01/11 13:57
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary reveals several negative aspects: a 7% decline in group revenues, negative EBITDA, and economic uncertainties. The Q&A highlights concerns about market recovery, profitability, and management's unclear responses. Despite some positive aspects like JEB growth and strategic transactions, the overall sentiment remains negative due to the revenue decline and financial challenges. The market cap indicates a small-cap company, which typically reacts more strongly to negative news, supporting a prediction of a negative stock price movement (-2% to -8%) over the next two weeks.
Group revenues EUR 535.1 million, a 7% decline year-over-year. The decline is driven by the D&PD business, which faced a 12% revenue decline due to continued softness in the early drug discovery market.
D&PD revenues EUR 391.9 million, a 12% decline year-over-year. This decline is attributed to a persisting soft market in early drug discovery and temporary decline in BMS revenues.
Just-Evotec Biologics revenues EUR 143.2 million, an 11% increase year-over-year. Growth is attributed to a broadening customer base, with non-Sandoz and non-DoD customers growing 105% year-over-year.
R&D spending EUR 27.7 million, a 33% reduction year-over-year. The reduction is due to directing investments to areas most relevant for partners.
Adjusted Group EBITDA Negative EUR 16.9 million, driven by weaker D&PD revenues and a fixed cost base.
Free cash flow Improved by 14% year-over-year despite tough comparables from the previous year.
Biologics business growth: Just-Evotec Biologics (JEB) achieved 11% growth in the first 9 months of 2025. The business development within non-Sandoz and non-DoD customers grew over 100%.
New molecules in clinical trials: Up to 4 molecules from the partnered asset pipeline are expected to be in Phase II clinical studies in 2026.
AI-driven platforms: Evotec's AI-driven platforms have been integrated into drug discovery processes, improving outcomes and reducing timelines. These platforms have generated over $200 million in order value.
Sandoz partnership: A transformational deal with Sandoz was signed, unlocking payments of more than $650 million over the next years and royalty streams from 10 biosimilars.
Expansion in biologics market: Evotec's biologics business is diversifying its customer portfolio and expanding its market presence, with significant growth in non-Sandoz and non-DoD business.
Cost reduction initiatives: Evotec raised its cost reduction target to EUR 60 million for 2025 and is ahead of plan. An additional EUR 50 million in cost-out and productivity measures is planned.
Improved operational structure: A new organizational structure was introduced, strengthening commercial and operational capabilities.
Shift to asset-lighter model: Evotec is transitioning to an asset-lighter, higher-margin business model, focusing on technology licensing and partnerships rather than direct manufacturing.
Focus on technology leadership: The company is leveraging its proprietary AI and biologics platforms to drive innovation and create value through strategic partnerships.
Decline in Group Revenues: Group revenues declined by 7% year-over-year, primarily driven by a 12% revenue decline in the D&PD business due to continued softness in the early drug discovery market.
Early Drug Discovery Market Challenges: The early drug discovery market is facing unfavorable VC funding conditions, impacting approximately 30%-40% of the company's revenue base in D&PD. This has led to reduced business development activities and higher-than-expected contract cancellations.
Cost Base Adjustments: The company has had to implement significant cost-out measures, targeting EUR 60 million in 2025, with plans for an additional EUR 50 million in cost reductions. This reflects challenges in maintaining profitability amidst declining revenues.
Customer Contract Cancellations: Higher-than-expected cancellations of contracts in the first half of 2025, due to strategic or scientific reasons, negatively impacted sales performance in the D&PD segment.
Regulatory and Transactional Risks: The sale of the Just-Evotec Biologics' Toulouse site to Sandoz is subject to regulatory approvals, including foreign direct investment clearance by French authorities, which could delay or complicate the transaction.
Economic and Market Uncertainty: The broader economic environment, including the lack of recovery in VC funding for early-stage biotech, continues to pose risks to the company's growth and revenue stability.
Fixed Cost Base Impact: The company's fixed cost base has contributed to a negative adjusted Group EBITDA of EUR 16.9 million, exacerbated by weaker-than-expected D&PD revenues.
D&PD Business Outlook: The company expects the trend of softness in the early drug discovery market to continue in the second half of 2025. However, there are signs of stabilization with an upward trend in the number and value of proposals to customers. The company remains vigilant and is strengthening its commercial organization to adapt to evolving customer needs.
Just-Evotec Biologics Growth: Revenue growth is expected to further accelerate, with non-Sandoz and non-DoD business growing over 100% after 9 months. A transformational deal with Sandoz is expected to unlock payments of more than $650 million over the next years, along with sizable revenues from royalty streams related to 10 biosimilars.
Cost Reduction Initiatives: The company is on track to deliver EUR 60 million of cost reductions in 2025 and is working on an additional EUR 50 million of cost-out and productivity measures for the future.
Asset Pipeline Progression: The company expects up to 4 molecules from its partnered asset pipeline to be in Phase II clinical studies in 2026, demonstrating scientific strength and potential for milestone and royalty payments.
Mid-Term Financial Goals: The company confirms its guidance for 2025 with targeted revenue of EUR 760 million to EUR 800 million and an expected adjusted EBITDA in the range of EUR 30 million to EUR 50 million. Mid-term goals include 8% to 12% top-line growth and EBITDA margins greater than 20%.
Sandoz Transaction Impact: The sale of the Just-Evotec Biologics' Toulouse site to Sandoz is expected to provide an initial consideration of about $350 million, with additional mid-term revenues from licenses, development services, and milestones exceeding $300 million. Long-term royalty payments are anticipated for up to 10 molecules.
The selected topic was not discussed during the call.
The earnings call summary reveals several negative aspects: a 7% decline in group revenues, negative EBITDA, and economic uncertainties. The Q&A highlights concerns about market recovery, profitability, and management's unclear responses. Despite some positive aspects like JEB growth and strategic transactions, the overall sentiment remains negative due to the revenue decline and financial challenges. The market cap indicates a small-cap company, which typically reacts more strongly to negative news, supporting a prediction of a negative stock price movement (-2% to -8%) over the next two weeks.
The earnings call presents a mixed picture. Strong partnerships and technology leadership are positive, but management's reluctance to provide specifics in the Q&A raises concerns. While strategic partnerships and AI integration are promising, the lack of concrete guidance and details, particularly regarding the Sandoz deal and revenue specifics, may temper enthusiasm. Additionally, the market cap suggests moderate sensitivity to these factors. Overall, the sentiment is balanced, leading to a neutral prediction for stock movement.
The earnings call indicates a negative sentiment due to several factors: declining revenues in Shared R&D, increased net debt, and cost management challenges. Although there is some optimism for mid-term recovery, the lack of a shareholder return plan and unclear management responses in the Q&A add to the uncertainty. While there is a slight improvement in EPS, the overall financial performance and market dynamics suggest a negative impact on the stock price, particularly for a small-cap company.
The earnings call reveals several concerning factors: a revenue decline in Shared R&D, increased net debt, and cost management challenges. Despite optimistic guidance, the lack of shareholder return plans and unclear management responses in the Q&A section further dampen sentiment. The market cap of €1.6 billion suggests a moderate reaction, leading to a predicted stock movement in the negative range of -2% to -8%.
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