Evotec SE
XETRA:EVT
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
5.265
21.51
|
Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
C
|
C3.ai Inc
NYSE:AI
|
US |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Dear, ladies and gentlemen, welcome to the conference call of Evotec SE. At our customers' 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.
Thank you so much. This is Werner speaking from Evotec. Welcome to our Q3 2020 reporting, which we called on our way to the future of R&D. As always, you can find the supporting materials for this call online under www.evotec.com. On Page 2 of this presentation, you see the whole team is assembled. I'm together here with our CFO, Enno; our COO, Craig; and our CSO, Cord. We are together, all back in our offices, but given certain travel restrictions, we are not at the same city at this stage. Most importantly is we are all well and healthy and fully active for the company. When you go forward on this presentation to Page 3, it looks like we are getting used to some COVID-related adoptions of our processes. And overall, the managing is -- the company is managing extremely well to get through this pandemic. And we will come out of it even stronger than before. So despite the pandemic, we are very optimistic for the future because, last but not least, it's our industry that delivers novel vaccines, novel therapeutic antibodies and novel antiviral treatments for faster and better treatment for a disease, which hasn't been there before. This is the service that this industry brings to the whole society, and the way we are doing this at this stage as a collective industry is nothing short of excellent. We are collaborating as a whole industry and really move faster in developing novel treatments than ever before. Evotec's platforms and know-how are also pivotal for the fight against COVID. At this stage, more than 16 companies globally are working together with us against COVID. This is probably best illustrated with our alliance with the Department of Defense, the DoD, and also with our recently announced grant from the Bill & Melinda Gates Foundation to make novel biologic treatments for COVID's treatments, which we are performing in our Just Evotec Biologics site. Q3 shows multiple highlights. Next to a very strong core business, we are building a co-owned pipeline faster than ever before, which is the center of our strategy. They are advanced our co-owned molecule right after the COVID shutdown in the summer when many clinical centers opened again into Phase II in RCC, which is refractory chronic cough, which is now up and running. And they are also advanced the same P2x3 antagonist into overactive bladder Phase II, which is also initiated since October. With this, our promise to make P2X3, a molecule which defines a whole pipeline, is closer to reality than ever before. If you go forward, on Page 5, you see that Q3 marks a very strong quarter for both segments. The translation of our strategy in Q3 into numbers worked very well. Strong growth, strong EBITDA, a confirmed guidance and close to EUR 500 million in cash after the capital increase in October show you that we are in a strong position. Yes, I think it's fair to say that even despite massive global challenges, we are in a very strong position. Given the very strong ongoing business, the visibility of certain milestone events, we are happy to confirm our 2020 guidance for the full year, which you see outlined on Page #5. When you go forward to Page 6, let me remind you of our unique business model. Our business model shows resilience to short-term volatility and even crisis as we see right now. Our partners want and they get an extremely resilient high-performing partner. Especially in times of global insecurity, our business model shows that it's gaining momentum and strength and even more support than it ever had before. Q3 clearly highlights the power of our unique business model, because we bring together best of both worlds to lead us to building a unique co-owned pipeline into the future. When you go to Page #7 of your presentation, we want to illustrate the optimism and tailwind for our business that you see probably best by showing you that we have not slowed down our recruitment efforts, we have even increased our recruitment efforts in 2020. With this, we are building a fantastic globally unique talent pool to advance drug discovery and development faster and better than anyone else. By the end of 2020, we expect about 3,500 co-workers on our 14 sites, and this is very important because we see significant growth and also accelerated growth into 2021 already now. When you go to Page #8 of this presentation, let me remind you and illustrate how important it is for us to build a long-term business. Building a long-term business requires also long-term strategic partners and shareholders to support this vision. On that note, we are very happy that on 12th of October, Mubadala Investment Company, a leading Sovereign Wealth Fund, has decided to make a significant investment into Evotec. Together with our long-standing strategic partner, Novo Holdings, this equity increase brought about EUR 250 million into Evotec, which allows us now to especially accelerate our multi-modality vision of our business going forward. When it comes to the translation of our business into financials, I want to hand over to Enno, our CFO, who will bring you into our 9-month numbers of 2020.
Yes. Thank you, Werner, and a truly warm welcome to all of you also from my side today. Happy to introduce you to our 9 months 2020 numbers. And to make a long story short, from today's view, Evotec is well on track to reach the 2020 goals that we have set. 9-month 2020 numbers saw a very good 12% increase on the revenue line, driven by several factors, and I will come back to the details on the next slide. The gross margin amounted to 24.7%, as expected, lower than the last year's 30.7%, mainly but not only due to the fade out of the Sanofi payments for the site in Toulouse. R&D expenses also increased 12% compared to last year's level, especially driven by further enhancing our platform, for example, in Panomics and cell therapy, which also underlines our continued and strong commitment to long-term value generation. The growth in SG&A stands at 26% and continues to follow by the growing number of employees and personnel-related expenses because of the overall organic and inorganic growth of the company. Focus areas remain the strengthening of PG and administration, the first time H1 2020 addition of Just Evotec Biologics/Jackpot in Seattle, and the added new business setup of Evotec GT starting in April 2020. In Q3 2020, you see the acquisition of assets and the started integration of BBS BioPark in Toulouse, including a related exceptional and one-off EUR 1 million registration fee, for which we have not adjusted our EBITDA. One comment also on the release of the German Regulatory Body, Bafin, published on October 29, with regard to a fine of EUR 350,000 that we have accepted to pay. The fine is related to the general or to the formal incorrectness of a delayed publication of the responsibility statement as an integral part of our H1 2017 report. Once detected, we have flagged this to the Bafin proactively, and we were fully compliant in our full year 2017 annual report, which, by definition, covers the first half of [ 2020 ] as well, obviously. We decided not to appeal against this ruling as scope of -- as scope for pushing boundaries with the German regulatories are limited and settled on the basis of these EUR 350,000. The other operating income turns out to be above last year's level. This value contains 3 different components. While R&D credits increased for U.K. and for France, we are facing changes in R&D tax regulations in Italy, as reported before, which unfortunately have led to a substantial reduction of our R&D tax credits in Italy in 2020. Another part is made up of Sanofi recharges for ID Lyon. And furthermore, and that is new with BBS BioPark in Toulouse receive rent from -- rent income from external tenants at Compass Marie Curie. All in all, that development results in an increase of the other operating result of plus 7% versus 9-month 2019 comparison. With a total of EUR 76.9 million, our adjusted EBITDA, as anticipated, remains below the level of 9 months 2019. But due to the good Q3 with milestone revenues from BMS, respectively, Celgene, as well as some smaller milestones from existing collaborations is recorded within expectations. The lower EBITDA line, despite a growing revenue line, is mainly to be seen in the context of the following points: fading out of payments from Sanofi for Toulouse after March 21, 2020, as discussed several times before; and despite good Q3 2020, still reduced milestone related and very margin strong revenues. We have temporarily reduced efficiency seen due to the COVID-19-related challenges, in particular, in Q2 of this year. We have an increase in R&D, we see a ramp-up of our J.POD or U.S. Seattle-based activities. And we have a growth related to additional SG&A costs, including the integration of Evotec GT and BioPark. And last but not least, we see a 14% headcount increase in anticipation of a robust demand in 2021. On top of that, the reversal of the U.S. dollar versus euro development in Q3 led to a negative FX impact of EUR 0.5 million on the 9-month 2020 adjusted EBITDA consideration. The net income amounted to EUR 5.8 million. And besides the reduced operating income, consolidated operational losses from our equity investments and FX losses accounted for the reduced number in comparison to the previous year. Let's take a closer look at the development of our top line and gross margin on Page 11. Group revenues increased by a strong EUR 39.1 million or 12% against the first 9 months of 2019. And it's important to notice this growth has been realized despite faded Sanofi Toulouse payments after the end of Q1 2020 with a negative sales impact of approximately EUR 15 million year-to-date. In addition, overall less milestones were recognized compared against the first 9 months of '19, also due to some slippage of milestones as mentioned before. Thus, the positive performance, in particular, originates from continued very strong growth of the base business across various business areas. When subtracting the positive H1 contribution of approximately EUR 16.3 million by Just Evotec Biologics and eliminating the Sanofi payment for Toulouse year-on-year plus taking out negative FX effect, we recognize a very convincing like-for-like growth rate of the base business of approximately 19%. This is showing for another time that Evotec is able to thrive in a challenging macro environment. Revenues from milestones, licenses and upfronts showed a positive trend in Q3 with EUR 10.6 million, totaling to EUR 18.3 million in the full first 9 months of 2020. However, milestones still remain below the comparable 2019 period with EUR 22.3 million. This, once again, underlines the volatility among the quarters when comparing milestone revenues. The now weaker U.S. dollar versus the euro had also an adverse impact on the sales of roughly EUR 0.5 million. Consequently, the overall gross margin totaled at 24.7%, confirming a solid base margin, but in total, a notable 6.0 percentage points below last year. This is mainly due to the lower milestone achievements in the first 9 months 2020, loss of payments for Toulouse, IFRS 15 material charges and adjustments for the [ deliverable ] projects being above last year, but without any margin and increased amortization as a result of the final purchase price allocation of Just. Coming to the Q3 results on Page 12, we see the positive impact of the increasing momentum through realized milestones. Q3 2020 numbers show a good 30% gain on the revenue line, reflecting the good base business and high level of realized milestones. R&D expenses increased by 36% to EUR 16.3 million, once again, emphasizing our strong commitment to this core activity. The increase in SG&A of 32% versus last year is based on the same arguments like I just described for the 9-month summary, mainly originating from first-time inclusion of BBS BioPark and related one-off effects, as mentioned before, the ramp-up of Evotec GT in Austria, the general FTE growth resulting in increased personnel cost as the main factors. Looking at the 2 segments, we can confirm that both segments, Execute and Innovate, are continuing to develop very [ good ]. Year-to-date Execute revenues, including Intersegment revenues, amounted to EUR 357 million, coming from EUR 308 million in the first 9 months of 2019, which translates into plus 16%. The Execute gross margin, as per year-to-date September, was 25.7% and thus, only slightly below last year's 26.3% due to the reason as I outlined before. The year-to-date 2020 adjusted EBITDA of EUR 92.3 million is also only slightly below last year's adjusted EBITDA of EUR 97.4 million. Innovate revenues year-to-date amounted to 47 -- sorry, EUR 74.7 million, strong 21% above last year's EUR 61.8 million, especially reflecting the milestones realized in Q3 2020 and are due to higher base revenues, including higher project revenues and added long-term partnerships. Innovate's total R&D amounted to EUR 49.8 million, which is 6% above last year, and SG&A accounted for EUR 10.7 million, also slightly above last year. The adjusted EBITDA was negative, but within the expected range and amounted to minus EUR 15.4 million versus minus EUR 4.2 million of last year's comparable period. Slide 14 summarizes Evotec's non-P&L related financial KPIs as per September 30 of this year, and they confirm the company's strong standing during these demanding times. You can see our main balance sheet KPIs at the end of Q3 on the slide. However, considering the proceeds from the successful capital increase carried out on October 12 of this year, thus after the reporting period, total liquidity increased to approximately EUR 500 million at that point in time and the equity ratio steps up to or stepped up to 50% while the net debt position flips into a net cash position. So going into the positive here. Overall, a very solid balance sheet and cash position with which we feel comfortable to meet and fulfill our ambitious business goals as anticipated. This completes the final overview -- financial overview, and I would like to hand over to Craig for more details and insight from the operational perspective. Thank you, all.
Thanks, Enno, and good afternoon to everyone on the call. It's my pleasure to kick off this section, in which Cord and I will take you through some of the key events in quarter 3. Starting on Page 16. The continued acquisition of extensions, continuations and new signatures, despite the operational headwinds of COVID-19, provides the continued momentum behind the double-digit growth in the base business. For example, Evotec commenced a new integrated drug discovery project with Boehringer Ingelheim and a major integrated partnership with PTEN Research. In addition, we signed a partnership with an undisclosed midsized biopharmaceutical company to apply our comprehensive suite of integrated services, disease knowledge and technologies from lead generation all the way through to IND, in which we're eligible for research funding and downstream upsides. And due to a excellent biosafety level 3 infrastructure and our company expertise in TB, we expanded our partnership with Austrianni.On Page 17, the robust base business performance represents further illustration of the power and the attractiveness of our flexibly accessible, highest quality infrastructure, the fully integrated multi-modality drug discovery and development R&D autobahn, which provides the efficient platform to support our own R&D and Innovate projects as well as the core and pipeline and Execute partners alike. During the course of the year, as a result of continued strong demand and operational performance, we've been preparing the infrastructure for further growth and investment in multiple high-value areas. To lift out just a few of these highlights of this expansion program, we acquired the site in Toulouse, now Campus Curie, extending our capacity for integrated drug discovery, particularly in oncology. We opened a new building in Goettingen in quarter 2, the beating heart of our cell therapy and panel exhibitions. We've identified and read a new larger location for our industry-leading proteomics team in Munich. We have available capacity for growth in all of our sites in the U.S., and we're committed to the design of a new bespoke building at our Manfred Eigen campus in Hamburg, which will be the world-leading lighthouse of iPSC work.And on Page 18, we're very pleased to announce today the addition of a new building to our major site in Abingdon, U.K., where we have just initiated scientific operations. The additional operations will host around 80 to 100 in-vitro pharmacology and protein scientists and will be filled rapidly. And as a result of the addition, the Abingdon site will now boost the colocation of in-vitro pharmacology, protein scientists, structural biology, drug metabolism and pharmacokinetics, computational medicinal and synthetic chemistry, formulation sciences, development chemistry, API manufacturer and commercial manufacturer, all co-located, thus bringing together all the key functions for cutting-edge and high-performance small molecule discovery and development. The Abingdon site already benefits from the strong relationships in proximity with the Diamond Light Source at Harwell, meeting our center of excellence in structure based drug design. Therefore, we're delighted to rename the site to the Dorothy Crowfoot Hodgkin Campus in honor of the Nobel Prize winning chemist who pioneered X-ray crystallography of biomolecules. And on Page 19, I'd like to give you a short update on the status of Just Evotec Biologics. The vein of which is to invent a disruptive and innovative end-to-end integrated process to transform the ability, flexibility and cost base of discovery and development up to commercial biologics manufacturer to enable wider access to important biologics. The construction of the J.POD facility at Redmond continues on track. Planning for arrival of equipment and validation is fully underway, and operational start of the facility of the future is expected to take place in the second half of 2021. The speed and agility of approach is perfectly suited to pandemic response, and we're pleased to disclose important new deals related to COVID-19 with the U.S. Department of Defense and also with the Bill & Melinda Gates Foundation. In terms of cutting-edge technical development of biologics, we are now preparing for the launch of how human-like or humanoid antibody libraries. The novel concept here is to create an antibody screening library, which is populated with [ members ], which are predicted to have highly favorable develop-ability characteristics coded in its source thus removing costly and unproductive iterations of selection and improvement from the antibody development path and setting up the ideal conditions for rapid cost-effective development through its commercial launch or our end-to-end platform. So I'd draw the section to a close by concluding that we're continuing the year with very high resilience through COVID-19, and we've continued to build and add technologies, modalities and capacity to support our future growth intentions. And with that, I hand over the next part of the scientific segment to Cord.
Thank you, Craig, and good afternoon to everybody on the call. With an Evotec Innovate business segment, we continue to make excellent progress in expanding and progressing our co-owned product pipeline together with our partners. Based on strong Q3 numbers, we expect that Evotec Innovate revenues increased by more than 20% over the last year. This would mark another year of exceptional growth for Innovate in difficult times. In the first 9 months of 2020, we have made excellent progress on all fronts of Innovate. The key goal continues to be the expansion and acceleration of our co-owned product pipeline. In Q3 2020, we can report significant progress in our clinical stage co-owned pipeline. Furthermore, we have also achieved important preclinical milestones, in particular, in our neurodegeneration alliance with BMS. And in addition, have built a very exciting new partnership with Novo Nordisk in the field of kidney diseases. Finally, we expanded our access to patient data and patient samples to continue to build our molecular patient databases through a collaboration with QUOD. In this case, the focus is on liver diseases. The progress in our clinical stage pipeline is particularly apparent, one of our partnerships with Bayer. Originally, we started this collaboration with a focus on endometriosis, however, with the pursuit of highly innovative mechanisms such as the P2X3 receptor and other first-in-class targets, additional opportunities open up as expected. The P2x3 receptor serves important roles in reception and sensory hypersensitization in sensory neurons. Together with Bayer, we developed BAY1817080, now called Eliapixant, a potentially best-in-class P2X3 antagonist. In an initial Phase II study in chronic cough patients, Eliapixant has demonstrated a highly promising safety and efficacy profile. Based on these promising results, a Phase IIb study in recurring chronic cough has recently been initiated. Furthermore, based on Eliapixant's excellent preclinical and clinical profile, Bayer recently also initiated a first Phase II study in overactive bladder as well. To illustrate the progress in our preclinical state collaborations, I would like to briefly focus on our BMS neurodegeneration collaboration, which is summarized on Page 21. We recently announced the achievement of yet another milestone in this collaboration. Overall, this is a [ sudden ] milestone and a collaboration we only started at the beginning of 2017. This partnership is based on Evotec's iPSC-based drug discovery platform. And when we signed the deal in December 2016, Evotec received a $45 million upfront payment and is eligible for -- to receiving potentially highly significant success-based milestones and royalty payments on each and every project. Since then, this partnership has been highly productive. We achieved 6 preclinical milestones, marking expansions, the successful development of individual projects as well as an early extension in the partnership in 2019. In total, this partnership already delivered over EUR 100 million in payments to Evotec and a broad co-owned pipeline in the field of neurodegeneration. We are very excited about the continued progress we have been making and believe that we will deliver the first clinical candidate in the foreseeable future. On Page 22, you can see that our iPSC platform continues to play an important role and continues to grow. This is not only true in the context of the BMS Neurodegeneration Alliance but in the context of other partnerships, such as the cure Huntington’s Disease alliance and even in the areas of safety and toxicology profiling. Most importantly, however, we continue to build proprietary drug discovery programs in a variety of areas, which we believe will be the foundation of future partnerships. In the field of drug discovery, we are pursuing projects in chronic kidney disease, in ophthalmology and various orphan diseases. And finally, in the field of cell therapy, we are pursuing projects in diabetes, cardiovascular disease and oncology. Although these projects may take some time before they deliver partnerships, we are confident that these partnerships will be of high-value and similar to our BMS neurodegeneration partnership. On Page 23, we would like to give a brief update on our strategy to build molecular patient databases as a basis for future, first-in-class discovery efforts. At Evotec, we believe that personalized precision medicine will continue to be a key mega trend within the pharmaceutical industry. Understanding the molecular mechanisms of disease is the foundation of being able to stratify patient populations, not only according to symptoms but rather according to molecular mechanisms that are driving the disease process. Defining molecular disease signatures based on molecular data enables us the development of disease-relevant assay systems. Ideally, this disease-relevant assays systems are derived from patients directly as we are doing it with our iPSC platform. We have been pursuing the strategy of building proprietary molecular patient databases in a number of disease areas for a number of years. Our most advanced molecular patient database is currently in the field of chronic kidney diseases. This chronic kidney disease patient database has grown from originally about 5,000 patients to now over 10,000 patients. We have already built a number of kidney disease-related partnerships, which are either completely based on these databases, who are heavily used them. Among them are our partnerships in chronic kidney disease with Bayer as well as a joint venture called NephThera with Vifor Pharma. And more recently, we signed a collaboration with Novo Nordisk, which includes a significant upfront payment, development milestones up to EUR 150 million per project as well as tiered royalties. In our continued effort to expand our molecular patient databases further, we recently partnered with the QUOD Biobank. QUOD stands for Quality and Organ Donation and is a consortium in the U.K., based on the U.K. transplant centers and the National Health Services’ blood and transplant organization. Within this partnership, Evotec will investigate more than 1,000 donors of the QUOD Biobank using a comprehensive Panomics analysis including genomics, transcriptomics, proteomics and metabolomics. These data will complement Evotec's existing patient databases generating a greater understanding of these disease mechanisms across indications. However, the particular focus is currently here on liver diseases. We are convinced that the strategy of expanding our proprietary patient databases will be an important cornerstone going forward for our Innovate strategy and will underpin future further drug discovery partnerships. So all in all, with the end of 2020 moving closer, we are happy to report that Evotec Innovate is on track to deliver yet another excellent year of growth and concomitant progress of our partnerships and co-owned pipeline. With this, I would like to thank you for your attention, and we'll hand back to Werner.
Thank you, Cord. Thank you, Craig. Thank you, Enno. Let's go forward to Page 24 and just illustrate one more time that our co-owned strategy does not stop at the level of individual programs. Our co-owned strategy building process goes even forward into academic centers where we build bridges and also into equity holdings that we built with companies where we see a high operational synergy. This strategy shows merits, and we just want to highlight a few companies where we have seen excellent progress in Q3, which will ultimately benefit the shareholders of Evotec, for example, Topas Therapeutics, Exscientia, Forge and Fibrocor made excellent progress in Q3, which you will hear a lot about in the future. When you go to Page #26 of this presentation, let me only say, stay with us. It's just the beginning of what we will build and are building at Evotec. We see a very strong 2020 ending and already see a very strong 2021 coming because all megatrends are supporting to build our unique business model forward and even faster into the future. With this, expect strong use to come from more integrated alliances from novel clinical entry points that we will report about and also from our co-owned strategy. When you go to Page #27, it's no surprise that we confirm our guidance, which we have given out at the beginning of this year, where it was really not clear how this pandemic will play out. Giving out the guidance and keeping a guidance by the end of the year is something which I think is remarkable because it shows that the whole organization of our 3,500 people is working together as one and is delivering as one, our guiding revenues of about EUR 440 million to EUR 480 million in 2019, will deliver on our EBITDA of about EUR 100 million to EUR 120 million in revenues and is very proud that we have even increased our unpartnered R&D spend to approximately EUR 45 million in 2019 because we see the long-term value of the R&D to build even more co-owned pipeline going forward. If you go forward, please be invited to dial-in into 3 hours of diving deeper and going broader of understanding and discussing Evotec. We are looking forward to meeting you again at our Capital Markets Day 2020, where we've given ourselves title, the R&D Autobahn patient-driven drug discovery and development and illustrate even more to you what we mean with novel technologies that are disrupting our sector, what we can show with an excellent performance of our platform to accelerate drug discovery and development. So please mark your calendars. Please reach out to investorrelations@evotec.com, to register for this event. We will make this much more exciting than any Netflix series that you could watch or any other thing that you could have on the screen in this period of time, promise. On that note, let me also invite you to continue to follow us into the year 2021. Please mark your calendars with our quarterly dates that we have already defined. And with this, let me thank you and invite you to questions for this call, and we are very happy to answer them as we go forward, the 4 of us together. Thank you so much. Thank you for following Evotec. With this, questions are very welcome.
[Operator Instructions] We've received the first question. It is from Igor Kim of Bankhaus Lampe.
This is Igor from Bankhaus Lampe. I've got a couple of questions. The first one, I think Cord mentioned with respect to the iPSC collaboration with BMS that you could -- that you expect the first clinical candidate already in the foreseeable future. So does it mean it might pop-up sometime in the first half of the next year? And if that will be successful, will you be eligible for the milestone payment? If you could answer this.And the second question is on the diabetes project, which was regained from Sanofi. Is there anything new on that -- on the potential decision, what you plan to do with this further?
This is Werner. I hand back to Cord on the first question, and I will take over the process of CureBeta then.
So in regards to the first clinical candidate in our BMS neurodegeneration alliance, we firmly expect that we can reach this milestone in the first half of 2021. That's -- everybody has to be aware though that, of course, the -- these kind of candidates have to move through extensive preclinical profiling, in particular, safety and tox profiling, and you never know if you can get through this. But overall, we are very confident that we are on the right track. And once again, from a time line perspective, you would expect it in the first half.
Thank you, Cord. And probably also to highlight on that front, that's why it's important that we are building a full pipeline out of our iPSC platform into neurodegeneration and not only one candidate. So that's really super exciting, what you can expect here to come. On CureBeta, we are very happy that we regained all rights, and we have always communicated that we are exploring both tracks to either go forward with the partnership and established company or that we are exploring the way to create a spin-off company like we have done it also already several times in that area. We continue to explore both options. We are very happy with the response of both options. And I think it's fair to say that during 2021, we will definitely have a clear solution on that process and go forward here. Most importantly, all protocols and all experiments to progress the science behind our beta cell regeneration projects are fully ongoing and are fully established because that has always been the platform which has been built in Goettingen. So no time is lost. It's just which corporate formation that we will choose for the progress of this project going forward. With this, I look forward to the next question.
The next question is from Nick Nieland of Citi.
Firstly, on the impact of COVID-19, it looks like you're starting to gain some momentum in milestones following a delay in the first half. I'm just wondering, is there a danger now we have a second wave and lockdowns in many countries, whether there's a bit of a kind of danger? And what have you learned from the first time round that you could apply regarding business continuity? Secondly, when might we hear any data on the P2X3 trials that Bayer has initiated in chronic cough and overactive bladder? I see the completion date of late '21, but I wonder if we might hear anything before that. And I wonder if you could update us on the status in the main indication of endometriosis. And a question on operating costs. Last year, you back-end loaded some costs into the fourth quarter. So some of the SG&A in Execute and R&D in Innovate, should we expect the same again this year? And I wonder if you could guide us whether your third quarter spend is an indication of the run rate we should expect in 2021. And then just a cheeky question to finish with is, I wonder if you could give us a peek into what to expect in Next week's Capital Markets Day.
Nick, thanks for your questions. Question four, I will hand over to Enno. On the impact of COVID, I think I hand over to Craig to give you a view of the operational measures that we have taken to secure business continuity as good as possible. But before I hand back to Craig, let me just briefly comment on P2X3. We are very happy that Bayer has started full force P2X3 in 2 major indications. It's, of course, in Bayer's domain to report interim data if they want to do so and to then ultimately give final data. The good news on RCC is that a relatively fast trial with a relatively fast readout. So that's, I think, where you should put timing here. And on your question about endometriosis, that's more than fair. That's definitely an indication which we expect also to be initiated in the near future, which given COVID situations has probably only been delayed because of, as you know, many clinical centers were very shy in recruiting patients if you were not secure about execution of clinical trials. So that's why that will commence -- probably it will commence when you have more security on -- execution security on these clinical trials. But I'm sure that all of you are aware, this is a general phenomenon in the industry right now. I take point 5 as well because then I can give back. So I think it will be key to illustrate the platform power that we have built of technologies that are called PanHunter and Panomics. So that's really one element of this Capital Markets Day, where you will get a great illustration of what we are doing there. And that brings together the power of machine learning that has been applied in our small molecule world, but also in our biologics world, which we will also highlight quite extensively. So that will be 2 key elements of this Capital Markets Day combined with an outlook, why we call our Just-Evotec Biologics a disruptive technology. And we will also quite extensively go into Just Pod And this will be all, I would say, covered into an illustration of why we think that building a co-owned pipeline is holding massive value potentially into the future. So that's the easy task that we want to fulfill in the 3 hours, and I'm very happy for your feedback then afterwards. With this, I'll first hand back to Craig and then to Enno.
Thanks, Werner. Thanks for the question, Nick. I'll try to be brief. I think you're right to interpret that we didn't see -- we only saw a modest negative impact, if any, of COVID-19 restrictions in Q3. Certainly, we saw some slowdown in Q2. And it's certainly true, I think that we are much better prepared now and much more resilient now than we were back in April-May period. Why? It's because as you [ imbibe ], we've learned a lot of lessons and we've maintained the infrastructures that put in place back then somewhat in our crisis mode back in April, May, but now it’s standard operating procedures for us for business continuity. And the measures include things like masks on in all the labs, all the floor plates and all the environments. Supply chain security, so that we've built up stocks to make sure that we're not exposed to lack of supplies. Social distancing, of course, which is achieved in many ways through canteens, corridors, office occupancy and so on through more increased remote working and indeed, much more effective and comprehensive alcoholic-based cleaning infrastructures. So I think overall, we are much better prepared. We are all fully operational on all sites and remain so. And I think the final thing I would like to add is that the -- what we also see is that compared to the first wave, we also see that, at the national level, I think there's a much stronger intent to keep businesses working for economic reasons. And so that also means, I think, that the likely danger that we face of a difficult environment due to national rules that we would have to comply to is less than it was before. Nevertheless, going into this winter, I think we're all very aware that there's still pandemic underway and that we've still got some uncertainty ahead, but we're managing it absolutely as best as we can.
Okay, then I take it from here. Thank you, Craig. And Nick, welcome also from my end to your question. So we do not expect any especially high operating cost or any extraordinary events in that regard, at least from what we can see today. However, we will see along the overall growth line of Evotec. We will see kind of a linear growth in the major fields of cost of goods, R&D and SG&A, but there shouldn't be any exceptional things on there.
Maybe also worth noting, Q4 typically is our strongest quarter when it comes to revenue growth. So we also expect this year to happen. This has been the pattern in the past.
The next question is from Charles Weston of RBC.
I have 3, please. First of all, following the fund raise, can you give us a sense of what CapEx and unpartnered R&D levels might get to in 2021 or at least your thinking around those 2 investments? Secondly, can you give us an update on your contract discussions for J.POD? And thirdly, do you expect to see much of a call on your own cash from the companies that you've invested in raising capital?
Thanks for the question. On CapEx levels and R&D levels, I think it's a bit too early to disclose our full budgets for 2021, but we're in the middle of finalizing that. What we can indicate to you is that we are preparing for strong growth and strong means above 10% growth on all lines, including footprint. So that's why CapEx will be strong. There is an evaluation ongoing of what we will do with our multimodality footprint, including the evaluation of further factories of the future called [ tapeouts ] that should be built and could be built. That's also not finalized, and we will give guidance on that as soon as we can. When it comes to contract negotiations ongoing for the J.POD, I hand over to Craig in a second. And when it comes to cash calls from our equity holdings, I hand back to Enno then in a second. So Craig, maybe first on [ tapeout ] and then Enno.
Yes. Okay. Thanks, Charles. Obviously, we would be very open for, in the position to disclose too much detail, but we are -- needless to say, we're very happy with the rate of discussions, the nature of the discussions we're having around J.POD. And we are very excited about the progress of the incoming business flow that will secure the operations into the second half of next year and, of course, very importantly beyond that. But there is no details I can reveal at this point about coming contracts. I think all I would ask is that you watch out for relevant news for it in the -- over the next 6 months.
Okay. Then I take it from here. With regard to the question on cash calls, it's a little bit hard to predict, but maybe I can give you some orientation from what we see so far in 2020, where we are expecting an amount in total of new investments and investments into our existing portfolio in context of ongoing or following financing rounds, which should be slightly above EUR 30 million, 3-0. And as the portfolio is slightly growing in the next year and we also will continue to invest into new opportunities, you probably could aim for an amount that is in a similar ballpark or slightly above, that's at least what we're currently estimating but final on tuning is still ongoing.
The next question is from Bruno Bulic of Baader-Helvea.
This is Bruno Bulic from Baader-Helvea. So the first one would be about Just Bayer. When should we expect the division to be margin accretive to the group? And the second one is about your stem cell business today, Lonza [ have done ] some partnering activities in that field. So basically, how confident are you the technologies stay competitive in that environment?
I had a problem understanding the second question. Would you be so kind and repeat it, please?
Yes, sure. It was about the stem cell business, your iPSC business. And you might have seen the news from Lonza and their partnering activities announced today. Yes. Yes.
So maybe this is an opportunity to hand back to Cord for a moment why our iPSC platform is truly differentiated in a second. On margin accretive business out of Just Bio, I think here, it really depends on when will be the final opening day of J.POD because that ultimately will immediately transfer into very high-margin business. We have always given guidance to the second half of 2021 here. And it's one of the great things that we can confirm that, that J.POD will be operational. So I think translating this into early 2022, is the right moment to expect here. But again, it's like when you build a house, never count the exact week. And that's how we look at this operation, but we are on very, very good track here. Maybe Cord, a few sentences about the differentiation of our iPSC business.
Sure. So we clearly expect to be highly competitive here with our iPSC platform. An iPSC platform can be used for multiple purposes, in particular for drug screening and profiling purposes but also biologics manufacturing. We would assume that is more interested in -- or more working in the field of biologics manufacturing. And we are very active, in particular, in drug screening and have built a very broad platform here, which is essentially then combining capabilities, not only on iPSCs, but combining it with being able to screen compound libraries, small molecules, antibody libraries, et cetera. And we are not aware that Lonza is doing this offering at this point in time or that anybody else in the industry is being able to offer that with the same breadth and opportunity as we are doing it. Furthermore, the iPSC platform is constantly evolving. So you need to generate patient-derived lines to model diseases. Here, I think we also have a clear leg up versus our competitors. And finally, when it comes to generating readouts for -- in the drug screening space, we have built a panomics platform that allows us to highly comprehensively profile the efficacy and also safety of candidate drugs in a way that we feel that is unique in the industry. So overall, we feel that the iPSC platform is here just sort of one puzzle piece in a much bigger picture, where we will continue to stay highly competitive. And we are constantly actually upgrading this platform as we move forward. On top of that, we are actually increasingly moving into cell therapy space, as we have mentioned in the presentation. And here with this, we are also sort of moving into the manufacturing of biologics, in particular, cell therapeutics or potential therapeutics where iPSC might be useful to produce them. And so I think this is sort of where you probably will see us sort of more encroaching on Lonza business and vice versa.
Thank you, Cord. And just to add on the synergy between our drug screening and cell therapy efforts and the translation into processes to scale up that we have gained and that were building up with Just Biologics -- Just Evotec Biologics are really phenomenal. And here, it's one of the cases where an M&A transaction will lead to significant synergies that you will see in the future. With this, next question, please?
The next question is from Joseph Hedden of Rx Securities.
Just one on Evotec GT. Could you talk a little bit more about the process you've been making there? I noticed EUR 3.6 million revenues. Could you confirm if those are external, and is the performance so far in line with your expectations? And then perhaps also what you expect from that unit in 2021?
Thanks for the question. I think we are very happy with the -- and never forget, we have started Evotec GT in April this year at the height of the pandemic. We are actually very proud that we opened the business during full lockdown, basically in Orth, in Austria. So the integration of this group is going extremely well. The performance with the existing projects is extremely well on track, and we are building up here. Now I would say, the path forward into unique R&D efforts that we then want to integrate into our co-owned pipeline building. It's too early to give this into numbers for 2021. But I think the signals that we do not only have internally but also from the team here that this is a very well up and running integration is one that makes us very optimistic here.
The next question is from Naresh Chouhan of Intrinsic Health.
Firstly, on Just Bio. The revenues, they will be close to $40 million this year because of very significant contribution from an AI platform, which I suspect is at a higher-than-average group margin. So can you help us understand the long-term trajectory for the AI business? Should we assume this line of business will be materially higher once you start to manufacture at Just? Or are these revenues associated with capacity you've already sold? And therefore, those revenues are kind of optimizing molecules that will be soon be produced by Just and therefore, does that revenue growth from the AI platform pay off in the coming quarters? Is there some clarity around that trajectory? On the iPSC diabetes project, can you tell us how that's progressing and when you expect to start to look for a new partner for that project? I know you've taken it in-house to develop it yourself or develop it further yourself, just interested in how that's going and when you expect that to potentially be out licensed? And then finally, one for you, Werner. You've been here at Evotec now for over 10 years. It's a very long tenure by anyone standards. You've committed to another 5. So just from your perspective, can you help us understand what -- why you thought the -- you're excited to commit for another 5 years, any insights in there would be helpful.
Yes. Thank you for phrasing it that way that the lack of opportunities in my job life makes me to stay here. I would really not go down that path. But I just think that it's fantastic to have a team that has a vision. I think it is fantastic to have a scientific platform that can change the way we think about drug discovery in the future. And with this, I'm really absolutely changed the way we think about drug discovery in the future. And that's whenever I think about it as fascinating as nothing else that is out there, and you will see what our [ tech ] platforms really do to the drug discovery and development process and what we have already done in the last 10 years. And with this, it always brings me to the point that it's just the beginning of the Google-like vision to build a co-owned pipeline that is basically leveraged through the whole industry and which defines the shared economy of drug discovery and development in a completely new and a completely unique way. And having here 3,500 colleagues and the management team share that vision makes me totally excited to serve for Evotec, and that's why I do it. And I hope that gives you enough justification to keep me on board. And with this, I'll probably hand back one more time on CureBeta to Cord to illustrate why we are going the dual path of evaluating this year, and I hand back to the AI-driven business and the Just business to Craig.
Yes. So thank you for your question regarding CureBeta. So ultimately, CureBeta is a really exciting project where we feel will be -- that will be really a game changer for how diabetes is treated in the future. And we are currently progressing the program internally and have initiated partnering discussions, but also financing discussions around the project can be overall, on both seeing traction at this point in time. And if this continues going forward, we are quite optimistic that CureBeta, one way or another will progress, move forward, either in a partnership or in a spin-out scenario or potentially even also internally. But we are exploring all options at this point in time. And in the meantime, as you can see from some of the press releases, we continue to invest into this and really drive it forward aggressively.
Okay. Thanks, Cord. And then coming back to AI and machine learning in Just Evotec Biologics. So just to be clear, so the AI and machine learning platform, Abacus, as it's called, is really fully integrated into everything we do there, at Just, that's also part of the reason why it's quite disruptive, we believe. And so it's an enablement of the prediction, the anticipation of problems, the removal of issues and then the prediction of best conditions for high-yielding and high-intensified manufacturer of batches. And so in answer to the question, do the revenues in 2020 reflect an AI business or not? I think it's absolutely clear to say that the revenues in 2020, which are based on the current capacities are enabled by this core AI infrastructure. And it's not a separate business model or business unit as it stands today. And we will give more information about this technology enablement right across the platforms and end-to-end sort of data surface at the Capital Markets Day next week. And then just to finalize this point, if you're asking about how there are -- we are just completing the validation pack to be ready as a commercial entity, if you like, a commercial offering early next year. So there are no revenues in 2020 from how -- I hope that clarifies the question.
The next question is from Kieron Banerjee of goetzpartners securities.
Just on -- mainly on the business model for HAL, just 3 questions, if you will. Firstly, could you elaborate on the business model and whether these assets once partnered under Execute might move over into the Innovate pipeline? Secondly, will you start to develop any of these assets yourself under Innovate instead of waiting for those partners, maybe? And then finally, could you give a little insight into the economics of these deals and how they might differ from, for example, from the iPSC platform also?
Thank you so much for the question. In all fairness, the business model for HAL is not finalized at this stage. One thing is clear that it's close to be launched by the beginning of next year. So everything that has been done has been internally financed. With this, it's our proprietary model. And we will use it the way we basically also use other platforms that we are generating, where we say, okay, what's the most value optimal way to bring it forward, where building strategic co-owning pipelines is the main objective. Can there be situations where HAL will be given out on a pure fee-for-service basis? Absolutely. But we really want to build this out and see what the -- basically case-by-case basis is, and that's also have to be discussed with partners out there. And as Craig already mentioned, launch and full disclosure of that will be first quarter of 2021.
The next question is from Victoria English of Evernow Publishing Limited.
Yes. Werner, thank you for mentioning the upcoming business model. You mentioned Google a few minutes ago, and I'm wondering if you had to think of one thing that would be the Evotec equivalent of the Google search engine, what would that be?
We are Evotec, and we are building Evotec. Evotec is unique, and that's hopefully how people will also look at it. But I think what really makes us unique is that we have a full integration of multi-modality platforms that allow multiple starting points for drug discovery projects. That's why the search engine comparison is one that comes to mind, that’s one aspect. And the second comparison that comes to mind, that everything in this industry is about bringing products that are differentiated and really working for the patient. So this precision medicine aspect, closer and more affordable to patients. And that's the little second dimension that we want to combine in our business model. And we could now take many analogies of other companies out there. But what we really are doing, we are building a unique Evotec and are just at the beginning of that.
Yes. Can I please ask one follow-up question.
Maybe just...
Oh, sorry.
Just a comment from my end. I think the last point Werner made is really a very important one. It's -- when you think about personalized precision medicine, it's been much talked about. And when you really think about, overall, the industry really underdelivered on that promise. And it's -- but it's a megatrend. In order to develop superior next-generation medicines that ultimately are disease-modifying and maybe even prevent disease progression entirely or prevent development of disease in areas, the only way to really attack this is by really focusing on precision medicine. Precision medicine will be driven by Omics data. What we have done and continue to do at Evotec is building this platform and combining it then with, especially once again the iPSC platform for drug screening, which allows us in a very bespoke fashion, build disease models that should be predictive for the clinic and clinical trial development and clinical trial design. And all of this will reach seamlessly into clinical development. And at least from our perspective, this is going to be the fundamental platform for Evotec going forward and which will position Evotec as a unique player in this space going forward. And if you look at every aspect that we sort of are doing and also announcing, you would see that these are just all little puzzle pieces sitting into this bigger picture of building an autobahn in the field of precision medicine, underpinned by a multimodality, where we essentially can identify the most relevant target for any disease and then go after it with any modality.
Victoria, you had a separate comment or...
Well, I was just wondering about the issue of patents and monopolies because that's been a big feature of the pharmaceutical industry for decades. Do you imagine that this model that you're beginning to describe would, in any way -- would be able to function within that patent environment where companies have monopolies for 10 or 20 years?
Absolutely. Because we are, actually, the sharing economy by basically opening up as many processes that can be shared. And only starting to [ get ] and give exclusivity to certain targets, where there is a unique feature that has to be progressed forward. So I think that's why the model also here is really an evolution of what we have seen in the past of pharma and biotech. That's a longer discussion. Happy to have it and would be best to meet in-person for that if ever on in the near future.
Next question is from Christian Ehmann of Frankfurt Research.
I keep it short. So I have a question about your fourth modality, the entire sense. Tools that you acquired from Secarna or you partnered with Secarna, so do you see any immediate or initial interest from your customers in this area? And what are your expectations for this? And one last one is what informed the decision to choose Antisense technology over, for example, RNAI.
Great. I think best also here, Cord, to you on Antisense.
Yes, happy to answer those questions. So first of all, Antisense is -- why do we choose Antisense. Antisense is a proven modality by now. With marketed drugs that generate billions in revenue. And it's exactly that kind -- that technology that we actually partnered with Secarna, so it's the exact same kind of chemistry for these marketed drugs. So we feel this is really a proven platform in that regard. And for other modalities, RNAI, et cetera, some of the -- there are still major questions open. They have not delivered yet. So that's why we chose Antisense and we feel that Antisense is highly complementary to all the other modalities we have brought in-house. And we are already exploring quite a number of drug discovery approach is based now in Antisense, we'll just have to see how they pan out going forward. But there is clearly an interest also from our partners into -- in this approach and because there are many highly attractive targets that are very difficult to target by a traditional means, such as small molecules or antibodies. And here, Antisense is clearly a very interesting option.
There are no further questions at this time. So I would like to hand back to you.
Thank you so much. Thanks also for the question-and-answer session. And with this, we want to reiterate our invitation for our Capital Markets Day on the 19th of November, where we look forward to hearing many of you again. And until then, stay safe. And have a great day. All the best. Good bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.