Dear ladies and gentlemen, welcome to the First Quarter Report 2018 of Evotec AG. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Dr. Werner Lanthaler, CEO of Evotec AG, who will lead you through this conference. Please go ahead, sir.

Thank you very much, and good morning to everyone on the telephone lines. We have uploaded a presentation that should guide you through our information about the first quarter 2018 of Evotec’s business. We will go together through this presentation and let me start by saying that it has been a good start for our external innovation business with a new business mix that we are bringing together to ultimately accelerate our key productivity and innovation in this sector. And we are together as you can see on Page 2 of this presentation with my colleague, Enno Spillner, our CFO; with my colleague, Mario Polywka, our COO; and our CSO, Cord Dohrmann, who together with me are managing this business. When you are following me to Page 4 of this presentation, you should appreciate that our growth does not come from mere chance. Our growth comes from many different forces that are working together. And if you look at the Evotec Execute, Evotec Innovate and our corporate activities you can see that all these things are very well coming together, and have produced a very good starting to 2018, which allows us to confirm our very good guidance for 2018 already now. Mario will guide you through the significant focus that we have made in Evotec Execute. Cord will inform you about ongoing negotiations with Sanofi, and also about the expected news flow out of our platform in Evotec Innovate. And on the corporate side, you should see that we are very happy with our ongoing integration of Aptuit, which is the result of our new business mix, and we have implemented preparations not only to make the company a more European style company by converting into an SE corporate format, we also have implemented a long-term strategic plan, which…

Thank you very much, Werner and welcome everybody to the first quarter results presentation, and as Werner said, I will focus on the Execute segment, where we are focused on driving our partners’ drug projects from our fully integrated discovery and development platform. If we move to Slide 9, you see a tremendously strong organic and inorganic growth in the Evotec Execute segment. The growth in revenues of around €30 million over the corresponding period last year was at €48.5 was obviously driven by a full quarter addition of Aptuit revenues, as well as excluding milestones a nearly double-digit growth of the core business. Maintaining an EBITDA margin above 20% of revenues despite lower milestone achievements in the first quarter, which is just the natural volatility of such payments and also the contribution of what is a fundamentally slightly different lower margin business of Aptuit. This really represents an excellent performance and one that we believe will only improve as the year and as the years progress. Moving to Slide 10, which gives an upshot of our customer base and type and where the customers actually fit and live. With 30% of our revenues being contributed from the Aptuit acquisition, it is no surprise to us that the strong dependence of the revenue makeup of our top 10 clients have decreased significantly in both relative and absolute terms. This spread of customer risk is, of course, most welcome. Our customer type remains fairly similar, but [indiscernible] biotech and midsize pharma companies, and this is driven by our client that requires the full integration of our drug discovery and now drug development solutions. Geographically we have seen a swing towards the Japanese market. This is assisted primarily by the strong Aptuit contribution, as well as some growth from the core Evotec…

Thank you, Mario and good afternoon to everybody on the call. Last year has been a spectacular year for Evotec Innovate and the first quarter of 2018 has been a very solid start of what we believe will be another great year for Evotec Innovate. Just as a reminder, the Evotec Innovate business segment is focused on long-term value generation through high value pharma partnerships, which not only deliver significant R&D payments, but also very significant upside value through potential milestones and royalties. Milestones usually range in the range of a few hundred millions, whereas royalties are tiered usually and can reach in many cases double-digit percentages. Based on the performance in the first quarter and the first - and the current outlook for the remainder of the year, we expect that Evotec Innovate will deliver very significant growth in 2018. On my first slide, Slide 17, Evotec Innovate’s financial performance is summarized. Revenues from Evotec Innovate are very solid and in line with expectations although slightly lower than in the first quarter of last year due to lower milestone contribution. We do expect that milestone contributions will increase in line with our growing portfolio of co-owned product opportunities, however, we cannot predict when exactly milestones will be reached in individual projects and thus the milestone contribution can vary very significantly from quarter-to-quarter. Due to the lower milestone contribution in the first quarter of 2018, EBITDA is also a bit lower than in previous years, and R&D expenses as you can see, are currently in line with prior year. So, in conclusion Evotec Innovate had a very solid start into 2018 laying a very good foundation for significant further growth in 2018. On the following page, Slide 18, I want to give a brief update on our co-owned product pipeline.…

Yes. Thank you, Cord. Thank you very much. And, welcome from my side as well to everyone on the call introducing the Q1 2018 numbers to you right now. Let me just make a brief upfront statement with regard to the pharma topic that’s from January 1, 2018 onwards, Evotec will now apply IFS 15 in our financial year, which is 2018 which is mandatory and for comparison reasons we have also adjusted the 2017 numbers accordingly. That said, overall, you can find additional information already in our annual report for 017 on this topic on page 92 in the English version. And, this has no significant impact so forth on our financial numbers in general. On slide number 25, let me now introduce our strong financial numbers for Q1 2018, a significant step up of the revenues has been achieved in compared to Q1 2017 increasing by 55%, which is mainly due to positive contribution by Aptuit and gross of the Evotec base business, which means also without Aptuit and without Cyprotex we would have seen an upswing in our revenues, so also the core business of Evotec keeps growing strongly. That said, please bear that we have not yet seen significant more volume in milestones in 2018 as indicated by Cord and by Mario, which is hopefully yet to come. This was different in Q1 2017, where we had received several milestones at the beginning of the year already. Obviously with the beneficial impact on revenue, gross margin and also EBITDA at that time. Looking at the gross margin which reduced from 37.3% to 23.4%, there’s two mainly or mainly 4 effects which I will describe on a separate slide, but as a summer upfront. This is about amortization, this is a different revenue mix, this is a…

Thank you very much. Thanks to all of you for calling our webcast and with this we open for questions.

[Operator Instructions]. The first question is from Falko Friedrichs, Deutsche Bank. Your line is now open.

Yes. Thanks for taking my question. I would have 3 please. Firstly on the gross margins, can you give us a rough idea of what we can expect here on the full year basis, is the fair assumption that it will likely be below last year’s level, and then also can you provide some insight on how the gross margin adapt to it, could be brought up to the Evotec levels? Then secondly, could you tell us how much of the other operating income line is actually coming from these R&D tax credits, and whether we can use that as a quarterly run-rate for the year? And, then my third question is, you mentioned a continuous focus on the expansion of the iPSC platform, would be great if you could provide some additional color on the recent developments here?

Thank you. The first stage that on the gross margin question. I will hand over to Mario. You should see that it’s not about bringing up the part of the company to other part of company, tweet about bringing all of our subject and all the processes together to ultimately run the best possibly integrates projects down our pipeline. And, of course somewhere down the line, you’d become more commoditized that’s why a lot of the businesses that we have in Aptuit has a distant gross margin in the markets than what Evotec does in a high innovation discovery. Having said that, you will see the gross margin of that Aptuit will improve significantly because of the fact that there will be more integrated deals coming. But what you should also appreciate, we have only acquired Aptuit and kicking it over in the fourth quarter of 2017. So, you cannot change in ongoing business which is very healthy and the context there, because these are long-term contracts that are running. So, the effects that you will see will take a while, but they will come. And, with this to give you a bit more color, I’ll hand over to Mario.

I’m not sure how much more color I can put to that, Werner, very clear explanation. I think there is - maybe it’s a fundamental lower margin with some of that Aptuit work because it involves a significant more material aspect, if you’re making API and then from then the products, the raw materials, which has to be taken as revenue because it’s part of the product you’re making, well of course dilute against the other costs of the project. But putting that aside as Werner said, in the early days of the acquisition, we absolutely see the strategic rationale and now are clients see the strategic rationale for this and the way to access better margin is to pull that together within drug discovery. The key thing here is of course the INDiGO, we are finding a tremendous effect going forward, it’ll improve to what it used to be and of course the more capacity we use on INDiGO then that will of course rise up margin. And, then of course, we are accessing time from a discovery base that are tiding to us, it’s a captive audience and we need to try that strategically though beyond INDiGO, and in a lot of cases into integrated to CMC, where the margins are considerably higher.

Thank you so much. The second question I would hand over to Enno which was on the disability of tax credit going forward?

Yes. So, tax credits in this quarter were in the range of €5 million to €6 million, but that said, we should be a little careful taking this is given for the next quarters to come, because this depends on the projects, which are eligible for R&D tax credit applications and also on the partner on the other side who are working on these projects, because they haven’t - R&D tax credit accreditation and sometimes you cannot fully or not and all transfer on the Evotec side. But obviously you can see that there’s an increase compared to the previous years and we will work on this to further step this up. And, obviously as now Aptuit came onboard, we have a third country which is allowing us to claim for tax credits, which we have funds instance in Germany or in the UK, and Germany and on Switzerland not allowed to do in such a way.

Perfect. And, I think the IPS question has only one natural owner for Cord.

Are your questions answered?

IPS, I’m sorry, I was on mute. So, in the IPS cells, we have already built very significant partnerships in the area of degeneration and diabetes, and then of course there many additional areas that where IPS cell technology can have very significant impact. And, here we currently have on our shortlist of areas in particular early developmental disorders, which lend itself extremely well to the technology, but also kidney diseases and certain eye diseases, master wasting diseases, including MS and quite a number of additional areas that we are highly exciting in this context. In each of these areas, the goal is really to reflect as larger patient population as possible, which means to continuously expand disease model of individual patient that reflects certain portions of such a population. And, increasingly as IPS cell technologies is taking hold here, IPS technology is not only used to reflect individual cell types, which are manifold essentially for the different diseases, but also to build organics and organ like structure based on IPS cell technology. So, going forward it’s really a very - this is only really just the beginning, I would say we are still at the very beginning of how to systematically implement IPS cell technology in the drug discovery process. And, here building the large libraries of patient drive disease models and ultimately becoming closer to the vision of creating the potential to conduct clinical trials in a dish and thereby then actually stratify patient population for subsequent clinical trials and thus hopefully improve clinical outcomes over the clinical success rates.

Okay. Thank you very much.

Thank you so much. Next question please.

The next question is from Joseph Hedden, RX Securities. Your line is now open.

Good afternoon. Thanks for taking my questions. Two if I may, firstly, the first quarter contribution from Aptuit of €25.3 million, it was below the Q4 number of €30.9 million. Can you just allude to if there’s anything significant driving that? And, then secondly, the interest rate, if you could tell us the amount of the amortization charged for Aptuit and Cyprotex is going through the costs of goods line? Thanks.

Thank you so much. Amortization question will go to Enno and maybe Mario that you can give a bit of the business mix and top line mixed color at the beginning that would be great.

Thank you, Julius. There’s nothing really behind, the slightly higher Q4 2017 versus Q1 2018 that’s Q4 is always and this is across all of the Evotec business line, a heavy quarter as you would have seen in previous years. And, of course a lot of the Aptuit business is large fee for service business versus the Evotec possible discovery business, which is now running FTE business. So, you can get timing issues where you get lot of projects finish within a particular quarter and then projects struggle at the quarter. So, nothing really fundamental there at all, a classical strong Q4 and as we go into Q 2018 we will build up through the quarters as the business comes through.

Thank you so much. Amortization Mr. Enno.

Yes. So, out of the total amortization that we have in right now, which is about €3.1 million, 2.8 and that’s the major portion go to Aptuit and Cyprotex in total. And, that will obviously decrease over the years slightly, but on average this should be the numbers in 2018.

I know. Is that going all through the costs of goods loan?

Yes.

Okay. Thanks very much.

The next question is from Igor Kim, ODDO BHF. Your line is now open.

Hello, this is Igor Kim from ODDO BHF. I’ve got a couple of questions. First on the INDiGO programs, now with two [indiscernible] with Petra and Carna, how many projects do you expect by the end of 2018, I mean, INDiGO projects? And, how many INDiGO projects you could expect in the midterm let’s say in five years? And, one question on iPSC cells, are there any - other similar iPSC technologies a part of yours and is there any, could you give a bit of color how you’re different from them, that would be helpful?

Thank you so much. Yes, second question either an answer of to ours or an answer of 20 seconds, I don’t know how Cord will do it, but if it goes to Cord. And, the first question goes to Mario, I think the short message is we came up with too much guidance, but overall we see a very, very great offering that we are putting together in between because that on the quantitative Mario would be good if you can give a bit of color.

Yes. Well, thank you. And, thank you for the questions. First of all, don’t be mistaken that the release of the two press releases with Petra and Carna, INDiGOs because at the moment I think we have approximately 10 to 12 INDiGOs ongoing. So, this packet to - at any one time, we can probably do between 20 annualized completed INDiGOs, it’s our view and we’ve already started some investment to be able to increase that by at least 30%, 40% over the next few years and then perhaps going out further into the 20, 21, 22 being able to double that. Of course, if the capacity is [indiscernible] capacity under the Q1, there’s only so many months in a year of course, but the number of rooms to do that is very important. But also very importantly is about API, because one of the areas here is been able to generate the API and make the product to go forward and run the JLP talks and the safety pharmacology. And, that can depend on the type of process. So, we get some horrific API processes in a 20 plus steps, which of course takes a while to make few kilograms JLP or we can base inform. So, the answer is ongoing probably around 20 or so within the year we have dreamed to double that within the next 3 to 4 years.

Thank you so much. And, IPS technology question to Cord.

Could you please briefly restate the question? I had some noise in the line.

Is there other technologies out there that are comparable to our IPS technology and if so which?

IPS cell technology is fairly unique in this regard that you that it is possible to really device very much patient, individual patient devised these models. So, there is nothing like it on that level. When it comes to what makes even takes special in the IPS cell disease model space, it is really the adaptation of a process that has been originally established, of course in academia, but we have industrialized the process to a point that we have been able to adapt the generation of specific cell types, reagents normal cell types, endocrine cell types, while others into a high throughput format that allows us to make these cell types in an 384 well format that is throughput screenable. And, that’s really the key differentiator that we have achieved in industrialization and robustness for process that is currently unparalleled in the industry and where we feel we have a step up and leg up on everybody else at this point in time.

Thanks, excellence. Thank you.

You’re welcome.

The next question is from Victoria English, Evernow Publishing Limited. Your line is now open.

Yes. I have essentially two questions. One concerns the comments that were made about rate of return on R&D. I’m wondering whether the prognosis that you’ve given, which is quite pessimistic, is for the industry as a whole or for a certain segment of the industry? And, the reason why I’m asking is that it wasn’t very long ago that Andrew already was - of GlaxoSmithKline was talking about achieving 14% rate of return on R&D and GSK? The second question concerns the infective project that you have underway with Sanofi. When I first read the press release, it wasn’t clear to me whether any of Sanofi Pasteur’s assets would be transferred to that? So, that’s a simple question. And, secondly I can see that Novonordisk is a shareholder and now we are holding since recently setup a fund to finance antibiotics and I’m wondering to what extent Novo is sort of involved in this anti-infective initiative?

So, first of all, it’s nice to hear your voice. We’ll start with the last one. Novo holding has setup the repair fund, which is exactly focusing on projects that are not in the typically sweet spot of venture capital of world in the longer timing need for development in the in the preclinic and the repair fund with about €160 million funding is a fund where many academic partnerships can now go to and has an additional source of funding, which I think it is illustrating the picture that the co-development partners and the supporting partners for anti-infective projects is not only Pharma companies because they are increasingly getting out of the segment, it’s really other institutions and organizations that provide the funding for these projects. So, I think this is a great synergy that can be seen and that we will of course try to capitalize on going forward. On other assets from Sanofi and our compensated transaction, but then they’re all portfolio assets that are in this infectious disease unit and they’re coming with the transaction. So, we take more than 10 ongoing projects most of them in discovery or in preclinical stage as the basis for this portfolio work that we bring forward. And, that’s also the expense that we want to bring forward into this portfolio building efforts. And, on your general question of greatest return in R&D. First of all, has to differentiate that we -as Evotec are going into first in class, best in class innovations where currently you either have top of the treatment or no treatment, and of course it takes a lot of scientific breakthrough potential serve. And, the second I mentioned that we all have to face is through increase personalization in general targeted markets will get larger, but…

Right. Okay. Thank you.

Thank you.

The next question is from [Alistair Campbell], Kempen. Your line is now open.

Good afternoon. And, thank you for taking my questions. I have a couple of questions on milestones. Could you provide a bit more into this plate of milestone between execute and innovate? And, just to get a feel for timing of milestone revenue for 2018, would you expect that sum in Q3 or is it more rather towards Q2? And, just two more questions, on INDiGO, is it fair to say the new projects you announced this year are more at gross margin level of Evotec base business. And, one question more interesting, what is the next major inflection point for the development iPSC platform? Thank you.

So, the first thing is milestones are not driven by quarterly events; which is time function, milestones are driven by biology. And, that’s why milestone for us is not only cash event, a milestone for us more than anything else value event where science is progressing into different value effect. Please always keep this in mind because sometimes we get really bit confused by just looking at quarter by quarter [indiscernible] that’s really not what is happening here. A milestone represents a massive value event because one as it is going forward in its biological development. Finding these biological events is not that easy, the nice thing for us is that we have at least more than 80 projects that are linked from milestones and that are fully invested. So, there is a lot going on more than ever before and that’s also what would be reflected going forward, if you look at the milestone curve over the last year, it has been growing steadily, which reflects a higher value that is portfolio is generating overtime. And, you have not seen many milestones in Q1. I think you should prepare for more milestones to come because there are more experiments that are reading out in the next quarters. And, the nice thing about our business is that even its worst case scenario would have been that no milestone would come, you would still have a very nicely profitable, not in need of any funding running biotech company, which then has even more projects going forward because they’re generating all these milestones going projects, so very long answer to your question. Second and executing [indiscernible] milestones projects, there’s one or two examples of that are there from a mix of targets that have become together by the idea of our partners…

And, on the INDiGO question.

Sorry, INDiGO gross margins as Mario was illustrating INDiGO is a package which had different component behind it and you will see higher gross margin package and lower gross margin package, I think the target is here to come to our Evotec execute margin as a minimum going forward if not higher and that’s exactly what Mario and the team is driving everyday to bring gross margins here significantly about 25%.

Yeah, okay. Thank you very much.

The last question is from Mike Cooper, Trinity Delta. Your line is now open.

Hi, thanks for taking my question. And, the question about the BRIDGE actually, I’m imagining you’re having lots of the universities knocking your door asking to form the BRIDGE collaborations with you, how to decide which university to go with and the related theme, Cord I think mentioned that, you’re working currently with 60 universities or departments, how many networks - how many network can you really clearly manage and what is the golden number there?

I mean it’s all about quality it’s the first thing to answer. The second thing to answer on this one is, never forget that Evotec is razor sharp focused on drug discovery and early development only. So, for us the - very quickly access if a scientific project is sitting to a disease areas not sitting to a disease area statistic area of innovation is high or not so high. So, I think here you really have a fantastic filter and the tax on the 2,000 point of scientists 76 area is so well trained in understanding what’s the nature of science, what’s their purpose scientifically that is there and normal throughput that this organization can manage. So, I would not be afraid of any limitation in scale here, which brings me to the number of academic places that we want to find of this BRIDGE funds. As you’ve seen, we have 16 in Toronto, we have 82 in Oxford, which are clearly two geographies of outstanding quality that we have signed up, we have ongoing relationship with Harvard and other institutions that are in the top league. So, I would say our target lists are the top 50 academic process and that’s what we will rollup overtime and that’s what needed to be all done in one quarter that’s in ongoing process over the next year, which brings it back to our strategy is long. And, therefore you will see with these pictures 10 years ago, no academic institution has a career center, now everyone is career center. And, in 10 years from now everyone would have a BRIDGE and that’s how we approach that.

Thank you.

As there are no further questions, I would like to hand back to you speakers.

Thank you so much for all your questions. Thank you so much for following Evotec. And, especially thank you so much to all our coworkers that are producing what we are able to discuss with you on the fantastic progress of the company. And, with this, I wish you all a great day. Thank you so much.

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