Dear ladies and gentlemen, welcome to the conference call of Evotec AG regarding the Q2 Report 2017. At our customer’s request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] May I now hand you over to Dr. Lanthaler, CEO who will lead you through this conference. Please go ahead, sir.

Thank you very much and welcome to Evotec’s reporting of the first half year of 2017. Leading external innovation to execute on innovate, that’s what the title page says on the presentation that we have uploaded for you on the webcast. And I hope that you can download that to follow this presentation. I’m here with my team, as you can see on page number 2 of this presentation, Enno Spillner, our CFO; Mario Polywka, our COO; and Cord Dohrmann, our CSO. When it comes to page four of this presentation, let me step back for a second and tell you the speed of the company is strong. Actually it’s very strong. We’re performing in our Execute segment, as Mario will show you. We are delivering on our Innovate project and are constantly creating more upside in our pipeline. And on a corporate formation track that we are on, we can see a lot of positive movement, which are basic in making the company strong when it comes to our shareholder base, but also when it comes to the opportunities that we are creating on our track to form a great company. On page number five, you'll see that our financials reflect our strong business performance and we’ll guide you into that in the second part of this conference call. But I think just by the first look to the numbers, you can see that we are growing in a controlled and high quality fashion in all segments of the business and that’s also what makes us confidently confirm our guidance that we have given out at the beginning of the year. When you go to page number six of this presentation, let me reiterate that most important for us it is to be clear. Clear within our strategy, clear…

Thank you very much, Werner, and good afternoon to you all. As Werner said, I'm very pleased to be here today to report on another record quarter, and consequently record half one for Evotec and especially here, the Evotec Execute segment. The revenues grew 26% around €100 million, a significant increase over the same period in 2016. And that led of course to a resulting increase in EBITDA of more than 25% to €28.4 million. And I’ll tell you over the next few slides what has driven this growth. Moving to slide 11, reassuringly, this growth in revenues has led to a somewhat decreased dependence on the top 10 clients. A strong growth in the number of indicated programs at biotech partners, is shown in the customer mix analysis, illustrating and maintaining the strong biotech upturn first seen a few years ago. This continuing trend I think will benefit Evotec significantly with the acquisition of Aptuit, as these partners typically require a first class, fully integrated end to end set of capabilities to proceed into the clinic. Europe continues to dominate the geographical split of revenue, but this is primarily driven by the majors Sanofi partnership, and accounting for that would probably be a 50-50 mix. Moving to Slide 12, as previously stated in the first slide, the growth in revenues is first of all driven by our core business, growth in new collaborations, expansions and extensions of existing collaborations, and milestone achievements. This is very important that we continue to grow what we have booked together organically. Examples are collaborations with Amira, STORM, Blackthorn Therapeutics, all of which appear on our website. We have received both pre-clinical and clinical milestones in the longstanding partnership with Bayer, which has also itself been extended and expanded into 2018. Moving to slide…

Thank you, Mario and good afternoon to everybody on the call. It is my great pleasure to give you an update on Evotec’s Innovate. As you may remember, in contrast to say the Evotec Execute business where we largely focus on fee-for-service work, in the Evotec Innovate business, we invest into projects to create new starting points for new strategic partnerships with pharma companies that carry a very significant upside for Evotec in terms of upfront payments, preclinical, clinical and regulatory based milestones, and participation in product sales through royalties. However, although Evotec Execute and Evotec Innovate are two separate business units, I would like to remind everybody that both business segments are operating from the same Evotec platforms. The next slide shows Evotec Innovate financial performance in the first half of 2017 compared to previous years. As you can see, Evotec Innovate continues on a very strong growth path. In the first half of 2017, we achieved a very significant growth in revenues, exceeding last year's numbers by almost 80%. This increase in revenues was driven by additional alliances, but also through the achievement of significant preclinical milestones. In particular, out of our Bayer kidney disease alliance and the Sanofi diabetes alliance. Along with the increased revenues, the adjusted EBITDA continues to improve, while the R&D expenses have decreased slightly compared to 2016. However, this bit in R&D expenses does not reflect the scarcity of new investment opportunities, but rather reallocation of project, resources and costs from R&D into comps. Over the last few years, we have continuously invested in the expansion of disease focused platforms, and on slide or page 21, you can see how we continue to do so. As well as putting platforms that would allow us to improve the translatability from preclinical data into the…

Yes. Thank you, Cord very much and also a warm welcome to this half year report from my side. It’s a pleasure having you all on the line today. And let me start with slide number 30, summarizing the overall group numbers here. And upfront, what Mario already mentioned, clearly this is the H1 record that we have to report compared to the previous years. And second message is we are clearly on track with regards to our numbers as we planned. So looking at the revenue first and breaking this down a little bit, so you see a significant step up by 37%, going to €103 million in total revenue. And this is based on a broad growth and also organic growth. That is important to mention here. So we have a strong base revenue growth going up 31% or 21.6 million. We have a good contribution by Cyprotex of €3 million, but we also have other important factors like to lose third party revenue going up, milestone growth as Cord and Mario both indicated. So we have a really broad development here with regards to revenue, which obviously then translates into a strong, slightly growing gross margin of 35.8%, which has slightly improved compared to last year, which is mainly due to milestones and good utilization. I mentioned to lose contributing and obviously also having a favorable FX impact of roughly 1.5 percentage points. One counterpoint that I would like to point out here is that we will see in the future and also here in Q2, roughly 1.3 million amortization from the Cyprotex customer list that we will have to amortize. On the R&D, we see pretty stable numbers in the range of €8.5 million to €9 million euros. That’s ongoing like that, aiming for the total…

Thank you all. With this, let me thank my management team for excellent work in the first half. Let me thank our whole group of employees in all sites at this stage who are really working for our partners and for Evotec projects as good as they can and as rational as they can to make new cures in a capital efficient way for the population out there. With this, let me also thank you for supporting us, for following us and for raising questions that we are happy to answer.

[Operator Instructions]. The first question comes from Mr. Daveni of Rx Securities. Please go ahead. The line is now open.

Thanks for taking my question. Congrats on a good quarter. I’ve got a couple. First question is just on the equity investments that you’ve made in the first half. I was wondering if you can just outline Evotec’s equity ownership of Forge and at Eternygen please.

Yes, we can. The question will go to Enno.

So you were asking, Samir about the share that we own in these companies?

Yes.

In Forge and in Eternygen.

That’s right.

Yes. So in Forge, we have 15.5% and in Eternygen it’s 22%.

Okay, that’s great. Thank you. And then my final question is just, I think this is the first time you disclosed the deal with Blackthorn Therapeutics. Perhaps you can just tell us a little bit more about that. And are we right to assume that’s an Execute deal?

Yes, but the disclosure level is here on the level that you get because we’re not allowed by our partner to say more at this stage. And thank you for respecting that.

Okay. Thanks very much.

Thank you. The next question comes from Falko Friedrichs of Deutsche Bank. Please go ahead. Your line is now open.

Hello. Thanks for taking my questions. I would have three. Firstly, could you provide us with the organic growth that you saw in H1 in your base business and how you see the trends for the second half of 2017 and outer years. Then secondly, regarding the faster than expected integration of Cyprotex, does this make you confident that the integration of Aptuit would also go very smoothly? And also, could you maybe provide more color on which steps of the Cyprotex integration are progressing faster than expected. And then my last question regarding the 13.3 million in milestones in the first half, and I know that visibility is fairly limited here, but are you reasonably optimistic that on a full year basis, you could reach at least the prior year’s level of roughly 20 million? And in this context, is there any more color you could provide on the potential milestones from Celgene in the second half?

So let me probably start with the Celgene question where Cord said was luck. We could potentially achieve a milestone and I think it’s important to underline that. The biology is not under control. So we don't know the outcome of biology. We just know that we are on the execution of the experiments, very well on track. So that’s all the color we can give you on that. And again, this is a five year contract as a minimum. So therefore we are not here counting on is this happening in this or in that quarter. It’s really counting on long term scientific breakthrough that we are trying on a new platform together with Celgene. And I also would want to caution all of us that we don’t put these milestones into a race for a quarter or not. It really comes down to the innovation potential of these milestones. And let me highlight again on this one, for example what we have achieved in the beta cell collaboration with Sanofi because this is just one, putting a flashlight onto early biology that can change potentially the world we have thought about when it comes to beta cell replication. And that’s what is always putting I think a different situation behind every milestone, that’s it’s not only a reflection of what’s the number there. It’s also what is the scientific breakthrough potential of these milestones that are reached there. Sorry for being so long on this one. Which also brings me to the guidance on milestones for the second half, which if you don't mind, we will not give because milestones depend on biology. But we give a clear guidance what we expect on our upside from EBITDA by growing that significantly. And we also show that our growth…

Yes. Thank you very much. So I think with Cyprotex, we would kind of classify as a scope acquisition i.e. an acquisition where we’re acquiring something which we don’t have. So it’s add-on, a complementary set of high class suite of assays for add-me talks. So they were a fantastic company already. We don’t need to badge in and add too much and there’s no cost synergies there. what we did I think is A, we helped them move to a better facility, which means that they can perform their science in a better infrastructure, which means they can deliver more efficiently, which of course translates through to the client. We have a much greater network of clients than Cyprotex had. Cyprotex sold in a very tactical manner. We’ve been able to, through our strategic relationships with a number of companies, sell through the Cyprotex offering in more strategic type deals. So that’s gone tremendously well. It’s all about not messing with what works, but bringing the best of Evotec to what they have. And that, as Werner says, will translate to the acquisition of Aptuit, which for the most part again is an increasing scope where I think this high class, preclinical and integrated CMC activities, which we don’t have. The cross selling opportunities, they’re absolutely fabulous for us, for our clients as well as for their clients into Evotec. And as Cord has pointed out as well, the opportunities to derisk our projects going through to the clinic will increasingly be in our hands due to this IND iGO suite of capabilities especially. We make sure that we keep people motivated. We have the ambitious and the energetic individuals managing these businesses. And as Werner says, we have become masters at this. We’ve become more experienced with every acquisition and they are able to use what are our lessons learned going forward.

Good. Then I take over. Coming back to the question of organic growth. So if you would for instance subtract Cyprotex, then you would go - come down from 103 million to 91 million in total revenues. So that is compared to previous year. That’s a growth of 21%. And you then would exclude also the Sanofi collaboration, then you would have a growth rate of 30%.

Which has told you that again, we don't think that way because on day one when we’re making acquisition, it is part of the whole systematic thinking of the company and that’s where people start sharing ideas, putting better solutions together for clients. But if want to carve out the numbers, you see especially the strong underlying growth, which I think is always only the entry ticket for doing an organic growth.

Great. Thank you I would have a short follow up question on the organic growth. So in your calculation, do you include or exclude the milestones?

In the number that I just mentioned, the milestones are included.

Okay. Thank you.

Thank you. The next question comes from Igor Kim. Please go ahead. Your line is now open.

Hello everyone. This is Igor Kim. I’ve got a couple of questions and first on the gross margin. You said that the two (indiscernible) that was (devalued), the amortization of customers of Cyprotex of 1.3 million, what should we expect here? Will it continue in a similar way to the rest of the year or was it rather a one-time event?

No. that will continue throughout the year.

Throughout the year. So until the end of the year, right?

Yes. That will go over several years. That’s part of the PPA allocation from the acquisition price. A major portion of it remains as goodwill, but a certain part has been translated into this value.

Okay, very well. (Indiscernible). Yes, that actually - that was my question.

Thank you so much and you’ve got wind plates obviously. We look forward to the next question.

The next question comes from Michael Higgins. Please go ahead. Your line is now open.

Hello. This is David Solomon in for Michael Higgins. Thanks for taking my question and congrats on the great quarter. I was curious with respect to the Aptuit acquisition, what steps are necessary to integrate the drug discovery division of Aptuit with Evotec’s drug discovery group. And as - related to that, what potential respiratory indications are targeted by this group. And my last question is regarding the target BCD Sanofi project, which recently achieved the milestone and whether - what steps are necessary and how close to IND submission that would be and how the Aptuit, INDiGO could contribute to that. Thank you.

Thank you so much. On the question around BCD, I hand over to Cord. On the question regarding the Aptuit setup and how it will go forward, I can give you a brief answer because it’s the intention to let the very well performing business of Aptuit, continue as a very well performing business without much interventions. We will just integrate where it is making sense and otherwise let’s just leave it as it is. And then the discovery part that you're mentioning, here as you know, we have the capacity need at Evotec, especially for Evotec Innovate, but also for Evotec Execute. There we just look at the project potentials and do those projects that create most value for the joint group. And with this, over to BCD and to respiratory diseases to Cord.

Well, thank you for your question. So in regards to the potential, what projects we have in mind here, currently all projects at Aptuit are customer driven projects in the respiratory space. And we view this mainly as area for potential future growth of the Evotec Innovate business. And here, in particular one area that we currently have in mind is as you know, we have been active, very active in the fibrosis space in particular kidney fibrosis and liver fibrosis and essentially lung fibrosis is just a small step away here. And we see this as a very exciting area where Aptuit can contribute really a whole slew of in vitro as well as in vivo models.

Thank you very much.

And BCD. The mass from BCD that was triggered in bringing this to the clinical situation of course would be immediately synergistic with INDiGO, but in all fairness we're not there yet to have a full clinical path laid out. But that’s all that we can say on behalf of this project because - and I also thank you for respecting that we cannot say more than our partners allow us to say about this project, but that we’re very excited about it. I think you hear that.

Thank you very much. I appreciate it.

The next question comes from William Ellington of Evernow Publishing. Please go ahead. Your line is now open.

Good afternoon. I would like to know when you plan to publish your second quarter results. Or should one just simply subtract the first quarter from first half to get the figures.

If you take the presentation which we have put out on the Internet, you’ll find the second quarter explicitly stated on page number 32. That’s broken down for Q2. So that answers your question.

Okay. Thank you very much.

Thank you. The next question comes from Mike Cooper of Trinity Delta. Please go ahead. Your line is now open.

A couple of questions. Firstly, can you quantify the revenue synergies that you’ve achieved so far with Cyprotex? And secondly, you’ve invested so far in seven companies. Is your plan to follow you investment, to maintain your position full time and if that is, what funds do you have reserved for follow on investments?

Maybe I start with the second question, Mario then we’ll come to the revenue synergies on Cyprotex. The great thing about what we are doing at this stage in company formation participation is that we really follow our principle of capital efficiency and capital elasticity on the data driven session. What do I mean if I say that? We want to not make any rule here, but the rule is that biology decides our capital intensity and our capital elasticity that we put behind certain projects. So if biology tells us that a project goes very well, we are able to scale up capacity, to scale up investment momentum and to scale up resources. If biology tells us that it doesn't go that well, we can scale it down, and that’s really always coming to this fast (surplus) decisions that we all need in this industry to work on the projects with the best opportunity cost that are provided to us. We have the potential to follow every financial round because as you see, we have a highly profitable business platform built. We have the intention to do much more than what you see today by leveraging our Innovate cross over platforms into much more company formations. And you will be surprised when I say much more, how much more we need. And on the other hand, we really want to follow the principle that only good biology deserves future investments. And that’s I think the strategy that we can apply. There’s no need to put a certain fund in place because we have given ourselves the most stringent governance by saying every single investment case has to be cleared through our supervisory board, by having here not a mixed up incentive structure, but a clear incentive structure. We only invest if we believe in the biology behind that investment. And that’s how we will continue to build this, and as I said before, make it really big in the future.

Hi Mike. It’s Mario here. Just on the Cyprotex question, of course I’m not sure we absolutely quantify what we bought in terms of revenue growth to what the current operation performs. But you know, Cyprotex will grow by more than 20% in 2017 over 2016. And I would give an estimate that we probably can see between 10% and 15% of that growth.

Great. Thank you.

Thank you. The next question comes from Volker Braun of Bankhaus Lampe. Please go ahead. Your line is now open.

Thank you for taking my question. I guess it's about order book and capacity. When looking at the inter segment revenues, it’s sequentially down versus Q1 and I guess that's not because of a lack of ideas in EVT Innovate, but more likely because of the strong order book in Execute. To what extent does that limit your projects in EVT Innovate if there’s not enough staff? I wouldn’t say not enough, but a limited amount of staff available for Innovate projects and how should we model that going forward? And maybe related to that capacity question, second part is related to Celgene in particular. Could you share an idea to what extent you have already started projects here percentage wise in relation to the total amount of theoretical projects or whatever I should take as a reference measure. So I hope the intention of the question is clear. To what extent is capacity limited and what does it take to ramp up?

Thank you for your question. Generally we view it really as an abnormality. So we are aggressively expanding, continue to expand our Innovate portfolio. Here in this situation, there were just a number of factors they came on top of each other. First of all, a very sizable Celgene deal where we also had to expand capacity. At the same time, we also forged a kidney alliance with Bayer that was also expanded - really expanded the BCD alliance with Sanofi. So it was just sort of in that regard an unfortunate coincidence that everything was going our way and that we had to start reallocating resources into those partnerships, rather than continue to focus on our own R&D efforts. But overall we are very convinced that by the end of the year we’ll be back on track and catching up here on all efforts. Once again, you heard me say that we have started a number of projects with Oxford University. So overall, the portfolio has not gotten any smaller. It’s just at an earlier stage and requires currently a little less resource, but this will change quickly.

Could you hire people fast enough or do you have to go for external growth for them?

No. we’re very happy at this stage as a general comment in how we can attract talent, which is also a fact that people want to try in Evotec. So that’s good and of course situation in going together with Aptuit is for us a situation where capacity can be built fast. And also what I would want to highlight here is the fantastic performance that we see in our site in Toulouse where we have been able to attract fantastic talent and where we were able from a capacity point of view when it comes to buildings, lab space and other things, to have people immediately on, I would say high performance and high value projects. That’s very important. I want to hand back to Cord again on the Celgene question if you want to comment on that, how many projects we have started with what percentage.

I don't think we can disclose it in detail, but it’s essentially a very solid number of projects that we have initiated. And the way the Celgene deal is structured, there is always scope for more, and we are basically on a very strong path currently to continue to fill in the pipeline here. Even in the Celgene, also that's not done. That is still work in progress. And we - but we are overall, I think we’re on an extremely good track and once again, from a technical point of view, how we initiate a project, brought them forward, we are extremely happy and very confident that we will come to value inflection point, quicker milestones. But the exact timeline for this is unclear, but so far we are extremely happy with the overall progress.

Okay. Thank you much.

Thank you, Volker. Next question please.

As there are no further questions at the moment, I would hand back to you, gentlemen.

This is fantastic. If at this point in time, you can of course also always accept the invitation if there are further question upcoming, don’t hesitate to send us an email, give us a ring, contact our IR and we are very happy to help you to better understand our business model, help you better understand our projects and help you better understand support our role. And on the other hand, let me wish all of you a continued great summer, and if you can send a little bit of sun to Hamburg, people would like that. Thank you so much.

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