Evotec SE (EVO) Q4 2020 Earnings Report, Transcript and Summary

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

Thank you very much. Welcome to our annual report 2020, the data-driven R&D Autobahn to Cures. It's great that you're on this call, and thank you so much for following Evotec. If you go to Page 2 of the presentation that we put out there and that I invite you to follow throughout this conference call, let me first tell you that I'm here together with my team in Hamburg, and I'm very happy to be here with Enno, our CFO; to be here with our COO, Craig; and our CSO, Cord. And let me start by thanking the whole company but also my closest team for a very special 2020. We did what every company should do. We were looking for the opportunity within the global pandemic crisis. We were forced to reexamine all our processes and practices, and we did it. And we took the chance to take the very best out of this moment, and we want to keep the best practices for the time beyond the COVID crisis, which will come and where we will come even stronger out of that crisis than ever before. With this, let me tell you that Evotec is in a strong situation, maybe it's fair to say that we're in a very strong situation. As I'm talking about the team, I would also like to highlight and congrat Cord to his appointment to the German Council for Science and Humanities. This is fantastic for Germany, Europe, but also the world because with this, we bring a person who is really outstanding into the essential questions that will lead the industry forward, that will lead the society forward, and with this, I'm very happy that we were able to see this appointment from Cord into this system. When you go to Page 4 of the presentation, I want you to see some of the highlights and also some of the lowlights that marked our last year. The data-driven Autobahn to Cures is very long and will only end once all currently untreatable diseases are cured. So let me first look back a bit into 2020, where you have seen many things happening. And these things are just the beginning that lead us on this R&D Autobahn forward, which is a multitrack Autobahn. 2020 is marked by very good progress in our co-owned pipeline, which is the essence of our business model. And here, we are very well on track to build the largest royalty pool in the industry that has ever been built. We saw new and extended innovative partnerships, especially in kidney diseases, in protein degradation and also in rare diseases, and Cord will talk more about that. With Just-Evotec Biologics, we are gaining very strong momentum, and we see how disruptive novel technology can be in the world of biologics. And this is also the reason why our J.POD 1 is in full swing very soon in the second half of '21, and Craig will also talk about J.POD 2, which we have initiated. We saw multiple new and extended Evotec Execute integrated drug discovery and development alliances. And also here, you see a platform that becomes an essential innovation hub for the industry growing every day. We are very happy about the successful integration of our new modality gene therapy out of Orth in Austria. And you see the acceleration of our innovation platforms, which go from EVOcells, EVOpanOmics and EVOpanHunter, basically into a very long-term strategy, which we now call Action Plan 2025, and which is introduced this year into the operations of Evotec for the long strategy building of this company. We are very happy that our strategy, which we initiated about 5 years ago to build bridges is coming to a critical moment and also sees a lot of momentum where a translation from science to the industry via our industrial BRIDGEs is really fantastic for academia, but also for the industry. And last but not least, let me also, at this point in time, thank many of the long-term investors who endorse our strategy and make the company with us better every day. If you go to Page 5 of this presentation, you should appreciate that all guidance elements have been met comfortably despite the fact that we had many things to counterbalance, and don't forget that this is all happening in a year of the pandemic. If you go to Page 6 of this presentation, you should see that our data-driven Autobahn to Cure is truly global. Evotec is the best possible innovation hub for new technologies, better precision medicines and better global access for more efficient and more precise drugs of the future. Page 7 is the point where I want to raise the question to you, why should you not be very comfortable with our current strategy? There is no reason not to be comfortable with our current strategy. And the main underlying reason to fully believe in what we're doing is our talent that we can attract and that we can retain. It's simply fantastic to see how many great people joined the company and how many great people we have in the company. And with more than 500 top talents now together with us driving on The R&D Autobahn to Cures, it is gaining momentum every day, what we are doing to bring more cures to patients. If you go to Page 8, you'll see that top talent needs top leadership. With very good leaders, we multiply the power of our teams. And in this spirit, we are very happy to show you only here 8 fantastic leaders who joined the company and who all take over essential processes that are leveraging the power of leadership, but also the power of teams here in the company. If you go to Page 9 of this presentation, you should see that we are following macro trends that give us a lot of support for the direction where we are sailing. And it is great to have not headwinds but backwinds where we are going. But most importantly for us is to see that from RNA transcriptomics, AI and machine learning technologies up to precision medicines, Evotec is not following the megatrends, we are leading these megatrends. And of course, if you look at the growth rates of these charts, you can imagine where our parcels are going. If you go to Page 10 of this presentation, you remember that about 5 to 10 years ago, we always had the vision to build a multimodality R&D Autobahn. Today, we can say that the best of innovation is happening on an unbiased R&D Autobahn to Cures at Evotec. So it's not only small molecules where we are driving. It is all modalities that we can provide to our partners in an unbiased fashion. With this, if you go to Page 11, you will, in the future, hear data and data and data again from us, but data is irrelevant if you cannot process data. And the beauty of Evotec is that we can collect, generate, understand and translate data into the drug discovery processes better than any other company. And with this, we are fully prepared for the tsunami of omics data, not only to process it, but also to translate it into integrated and more efficient drug discovery than ever before. If you go to Page 12 of this presentation, you should see that our journey to accelerate the path and find new cures is just at the beginning, despite the fact that we are launching a new action plan, Action Plan 2025, today. It is an important step in the direction where we are going, but also here, you can see that we are broadening our scope to become an essential platform and infrastructure for the industry, that's the secret behind Action Plan 2025. And that's why you can already today be certain that this will not be our last action plan in the long-term history of this company. If you go to Page 13, let me remind you of our business model. It is unique, and it is the idea to co-own with our partners and to have skin in the game with our partners. Why is this so important? Because for us, no disease is a commodity. For us, every disease has to be tackled as efficiently as possible. And that's why we want to be as integrated as possible with our partners. Coming to this integration comes from 4 sources where we generate co-ownership: One, is our multimodality innovation platforms; two is our indication-driven pipelines; three is our Just-Evotec Biologics platform; and four, our BRIDGEs and other co-owning vehicles that we have built. With this, let me thank you, and let me hand over to Enno, who will bring you into our financial results of 2020.

Yes. Thank you, Werner, and a warm welcome also from my side today here from Hamburg. This is to introduce you to our financial performance 2020. And let's start on Page 15 with a look on our consolidated numbers. 2020 was another landmark in Evotec's growth over the last years. We, for the first time, exceeded the €500 million revenue line, and this despite the global COVID pandemic. 12-month 2020 numbers show a very good 12% increase on the revenue line. I will come back to the details and also to the composition of the growth factors on Page 18 later on. The gross margin amounted to 25%, as expected, lower than last year. And this is mainly due to the fadeout of the Sanofi subsidy for the site in Toulouse and a lower level of milestone achievements, partially due to the slippage triggered by the COVID-19 pandemic, plus a growing part of margin-neutral IFRS 15 sales being recognized. R&D expenses increased by 9% compared to last year's level, especially driven by further enhancing our multiple platforms and investing into our co-owned pipeline. The growth in SG&A stands at 16% and relates to the overall organic and inorganic growth, like, for example, the first time addition of the first half 2020 numbers from Just-Evotec Biologics, the ramp-up of the J.POD 1 in Seattle, plus the added new business setup of Evotec GT in Austria and the integration of the acquired biopark by Sanofi called BBS in Toulouse. The other operating income turns out to be roughly on the last level -- last year's level and contains 2 main components: R&D tax credits and the Sanofi recharges for ID Lyon. All in all, that development results in a slight increase of the other operating result. With a total of €106.6 million, our adjusted EBITDA lands well within our communicated guidance, and I will give you a more in-depth overview on the EBITDA development on Page 21. The net income amounted to €6.3 million. And besides the reduced operating income, consolidated operational losses from our equity portfolio and FX losses contributed to the reduced number in comparison to the previous year. Moving to Slide 16. Looking at the 2 segments. Both segments continued to stay on a strong growth path. The year-to-date Execute revenues, including intersegment revenues, amounted to €489 million coming from €420 million in the 12-month 2019, which translates into a 16% increase. The Execute gross margin for 2020 was at 26% and thus, exactly on last year's level. The adjusted EBITDA for Execute came in at €129.3 million, which was well ahead of last year's adjusted EBITDA level of €122.5 million. Innovate revenues year-to-date amounted to €105.7 million, which is a strong 12% above last year, due to higher base revenues, including higher project revenues and added long-term partnerships and, again, despite lower level of milestones than in 2019. Innovate's total R&D amounted to €69.9 million, which is 7% above last year. SG&A accounted for €15.5 million, also slightly above last year. The adjusted EBITDA for Innovate was negative, but within the expected range and amounted to minus €22.7 million versus last year's €0.6 million, slightly positive. Main reason was the anticipated lower level of achieved milestones in 2020. Looking at the quarter on -- Q4, on Page 17. Coming to the Q4 results, we see the positive impact of a strongly developing base business. Q4 2020 numbers, again, show a good 12% gain on the revenue line, reflecting the excellent base business and despite very high level of realized milestones in the previous year. This becomes also evident in a very good gross margin of strong 26%. R&D expenses increased by 4% to €17.9 million, exceeding last year's already strong level of R&D investment. SG&A expenses show even a decrease by minus 6% versus last year due to additional saving effects and COVID-driven lower travel and training costs and despite further FTE growth in that field. The impairment of intangible assets of €3.2 million is linked to our participation in Haplogen, who lost an important financing partner, so that the development of the underlying projects was no longer secured and triggered the impairment. The adjusted group EBITDA for Q4 turns out with a very good €29.7 million, practically remaining on last year's level despite less margin-strong milestones. Moving on to Page 18. Looking at the year-on-year revenue development, the increase is completely driven by a strong base business, reflected in the organic growth of additional €63 million versus last year. This is a strong evidence for the high revenue quality, especially coming from our sustainable repeat business with our long-term partners, and this even with a lower milestone level than in 2019. Portfolio development includes effects from the end of the Sanofi Toulouse payments and the effects from the not comparable first half year 2020 financials for Just and J.POD as first consolidation took place from July 2019 onwards only. Mostly due to the weakening U.S. dollar against the euro, in the second half of 2020, revenues were also negatively affected by the currency effect of minus €6.8 million, meaning that the overall sales development at constant 2019 FX rates would have even been better or higher, namely ending at €507.7 million. Coming to Page 19. The EBITDA bridge visualizes that its development was negatively impacted by anticipated portfolio effects, especially the termination of the just described Sanofi Toulouse subsidy and a negative FX effect coming from a weaker U.S. trend in the second half of 2020. Netting out these 2 factors, Evotec shows an organic increase compared to 2019, despite corona challenges and lower contribution from milestones. In the end, we achieved €106.6 million, stayed well within our unchanged guidance for 2020. Slide 20. Slide 20 summarizes Evotec's very solid non-P&L-related financial KPIs. They confirm the company's strong standing during these demanding times and have been all substantially further improved. Total liquidity increased to €482 million at that point in time. This was fueling the balance sheet up 24%, while the equity ratio at the same time steps up to more than 49%, and the net debt position, including IFRS 16, nearly flips into a net cash position actually. Overall, a very solid position with which we feel very comfortable to meet and fulfill our ambitious business goals in 2021, furthermore indicating sufficient headroom to invest into organic and strategic growth. With this completes the financial overview, and I would like to hand over to Cord for more details from the operating perspective. Thank you, all, and Cord, please take over.

Thank you, Enno, and good morning, and good afternoon to everybody on the call. At Evotec, we believe that the precision medicine megatrend is increasingly driving the pharmaceutical industry. And maybe more importantly, we believe that this trend is still at its very beginning. This is really best illustrated by the fact that we are still living in a world where 90% of all drugs only work in 50% of all patients. The associated costs of these ineffective treatments are enormous. Current estimates are exceeding €350 billion annually. More precise medicines and more precise interventions are the only way to really improve on this. At Evotec, we also believe that we can play a significant role in accelerating precision medicine by integrating and industrializing emerging technologies early on into the drug discovery process. This will allow us to deliver more effective therapeutics to patient populations that will actually benefit from these. For all of these reasons, we have been building what we believe will be the precision medicine platform of the future. This platform is shown on Page 22. It has a number of essential components which have to be brought together in order to have maximal impact. A very important component, molecular patient databases. These databases are fundamental requirement to understand the molecular mechanisms of disease, and thus, lay the foundation for precision medicine approaches or early validation of any novel target-driven approach. Connecting molecular patient profiles with clinical metadata redefines health and disease on the basis of molecular profiles rather than symptoms. Secondly, we have built an industry-leading iPSC-based drug screening platform, which can model diseases in many different cell types and even more diseases. Patient-derived cell-based assays are crucial to more accurately model disease than it is currently possible in rodent cells or rodent models. That's why iPSC-based assays have become the new gold standard to profile drug candidates in the preclinic. Furthermore, we have built a proprietary multi-omics data generation platform called PanOmics. It is industry-leading when it comes to throughput, robustness and cost efficiency. This is in particular true for our transcriptomics and proteomics platforms, which are probably more important for most precision medicine approaches than genome sequencing data. Moreover, we have built an artificial intelligence and machine learning supported omics data analysis platform, which is called PanHunter. PanHunter can facilitate the analysis of big omics data sets which ultimately measure the severity of disease as well as the treatment of effects more accurately than ever before. PanOmics and PanHunter together are uniquely suited to support omics-driven precision medicine approaches throughout the whole drug discovery and development value chain all the way through to the clinic and the market. Finally, a better understanding of these disease mechanisms reveals the most disease-relevant intervention points or molecular targets for development of novel first-in-class therapies. Due to the fact that Evotec has built up a multimodality platform, we can always go after the most disease-relevant targets with the most suitable modality. This could be a traditional small molecule, an antibody, bifunctional biologics or bifunctional tumor molecules, antisense or even gene or cell therapy approaches. We believe that Evotec is one of very few companies, if not the only one, that has assembled such a platform to the extent under one roof. There are, of course, other companies who have individual components, but the integration of these platforms into one seamless precision medicine platform is essential to develop its full strength and impact. This is really unique to Evotec and positions Evotec as the drug discovery partner of choice in the industry. On the next page, Page 23, let's briefly review the progress we have made within Evotec Innovate on our co-owned pipeline. 2020 was clearly affected by the corona pandemic, which not only delayed clinical trials but also affected discovery efforts and ultimately milestone achievements. Despite these significant headwinds, Evotec Innovate posted a revenue growth of 12%, surpassing the €100 million mark the first time in its history. And as this growth in 2020 comes on top of about 40% growth in 2019, we consider this yet another great year for Evotec Innovate. On top of continuously building future commercial upside for Evotec, Evotec Innovate contributed yet again significantly to the overall business growth. Most importantly, Evotec Innovate's co-owned product pipeline continues to grow and advance. What is particularly noteworthy is the fact that despite the headwinds from corona, we achieved quite a lot of progress when it comes to the development of our clinical stage pipeline. As you can see on this slide, our Eliapixant franchise continues to advance and expand. Eliapixant which we are developing together with our partner, Bayer, is currently in Phase IIb clinical trials in chronic cough as well as in Phase II studies for overactive bladder, neuropathic pain and endometriosis. All of these indications are characterized by numerous unmet medical need and thus have significant market potential. Beyond the progress with Eliapixant, we initiated a Phase I clinical trial for chikungunya virus using our antibody EVT894, which we are currently developing with support from the National Institute of Allergy and Infectious Diseases, which is part of the NIH. Looking forward, we do expect further advancement in growth of our clinical stage pipeline from various programs, such as, for example, from our mTORC project with Boehringer Ingelheim and our B1 antagonist program with Bayer. Both are expected to enter Phase II clinical trials in oncology and gynecology, respectively, in 2021. Furthermore, we are expecting various projects to enter clinical Phase I studies. We are particularly excited about the first program of our BMS neuro line, which is expected to enter Phase I studies this summer, early fall. Finally, we are expecting that our co-owned oncology project with Exscientia as well as our immuno-oncology project with Sanofi will also enter the clinic this year. So overall, as our clinic stage pipeline is not only progressing, but it's also broad routing significantly. Another aspect of the pipeline that we really discussed is the preclinical discovery stage portion, which on this slide is really not adequately represented. In order to get a better feel for what our preclinical discovery stage pipeline looks like, we tried to show the pipeline according to indication areas covering all individual projects in each indication area. And this is shown on the next slide, Page 24. As you can see on this page, Evotec's co-owned and proprietary pipeline continues to grow. In total, this pipeline currently comprises over 200 projects with significant upside for Evotec. Evotec holds significant upside in about 130 projects in total, about 100 projects carry upside through milestones and royalty-bearing partnerships, which are fully funded by our partners, and an additional 60 projects hold upside through equity participations or spin-out companies that Evotec co-owns. In addition, Evotec Innovate currently fully owns 40 projects that are supported through R&D investments, and which are expected to prime the next generation of industry partnerships. What you can also see on this slide is that Evotec is particularly active in neuroscience, oncology, metabolic disease and associated complications such as kidney diseases, but also in immunology and inflammation, including women's health as well as infectious diseases. This pipeline in each and every areas are very strong and probably belong to the strongest pipelines in the industry. This is especially true for neuroscience, oncology, immunology and inflammation as well as infectious diseases, where each and every pipeline consists of more than 40, and in some cases, over 50 projects. It is especially the early-stage pipeline which gives the glimpse of the future. We are confident that these extensive pipelines will continue to deliver development candidates, which will then end up in the preclinical development and ultimately in our clinical stage pipeline. Now that we have looked at asset-driven value creation and product-related upside for Evotec, we also want to briefly discuss platform-driven value creation and the upside we generate purely based on innovative platforms. As you can see on Page 25, Evotec Innovate continues to make significant investments in drug discovery platforms. Most of these investments support the precision medicine platform I talked about earlier. And here, you can see that each of the major components of this platform, like, for example, molecular patient databases, iPSC, PanOmics, PanHunter, but also multimodality, actually consist of various smaller puzzle pieces, which we continuously strengthen and improve through our investments. I won't go through all of these, but really just want to mention 2 examples, which were the basis of our most recent Innovate deals. First of all, we continuously keep investing in our molecular patient database by adding more and more patient cohorts, not just in the field of chronic kidney diseases, but also beyond. And another example is the establishment of a platform that enables the targeting of RNA via small molecules, which essentially further expands the reach of our small molecule platforms into a space that is largely considered to be the undruggable genome. These platforms are value generating, not only in terms of genuinely improving our ability to run drug discovery programs and improve their likelihood of success, but they are also directly linked to new partnerships that carry significant commercial upside for Evotec. Since the beginning of the year, we have signed 2 Innovate deals which carry significant milestone and royalty upside. One with a leading U.S.-based biotech company called Chinook Therapeutics, based on the molecular patient databases; and the other deal was signed with Takeda based on our small molecule RNA-targeting platform. The Chinook deal is really the fourth deal involving our molecular patient database, as you can see on the next slide. Our first deal in chronic kidney diseases was signed with Bayer in 2016. Here, the patient molecular database was not the only component driving the deal, but it did play an important role. In 2019, we signed a second deal in chronic kidney diseases with Vifor Pharma, where we, together with Vifor, established a joint venture, which was fully financed by Vifor, and Evotec still maintained a 50% co-ownership in all projects. And at the end of last year, we signed a deal with Novo focused more on diabetic kidney diseases involving an upfront payment, significant research funding as well as significant milestones and tiered royalties. Our latest deal we signed in Q1 of this year with Chinook, a clinical stage disease company, kidney disease company, and this deal is also based on our molecular patient database, but this time focused on certain rare kidney diseases. Also here, we received an upfront payment as well as research funding and significant milestone and royalties, which are on par with our Novo deal. Another example of platforms driving upside deals with significant milestone and royalty upside is our most recent deal with Takeda. This is shown on Page 27. Evotec has established and validated a small molecule platform that allows the targeting of RNA molecules, which is particularly attractive for targets that cannot be addressed by more traditional means. The platform covers the identification of suitable RNA tertiary structures, which can be targeted by small molecules and then the identification of suitable RNA binders, confirming their -- also their selectivity and target engagement. Within this collaboration, Takeda and Evotec intend to pursue a number of targets in various indications. And in addition to research funding, Evotec will receive very significant milestone payments up to $160 million per project as well as tiered royalties. With this, I am at the end of my part of the presentation. Once again, 2020 was yet another strong year for Evotec Innovate, and we already had a great start into 2021. Thank you for your attention. And with this, I would like to hand over to Craig.

Thanks, Cord, and good afternoon to everyone on the call. On Page 28, 2020 was an extraordinary year in which -- in many respects. So it's a real pleasure to share with you some of the key highlights and achievements of the year, and perhaps more importantly, some of the key steps we took despite the pandemic to put ourselves in the best position for continued and further growth in 2021 and beyond. For some years, we've been recognized as industry leaders in highly integrated seamless working between scientific disciplines. We've now extended this to integrated R&D such that the traditional development considerations, such as biomarkers, human PK, translational biology, clinical planning, safety assessment, manufacturability and so on, are all taken into consideration during the iterative stages of design and discovery. We believe this high-value offering has strongly contributed to our continued growth of base business, 16% increase in revenues in this segment, through addition of new partners and extensions and expansions of existing relationships. Feedback is excellent. Our return rate of business is very high, around 90%. And inspired by these indicators of confidence, we made various commitments during 2020 to increase our capacity for further high-value businesses on our existing sites, thus creating operationally efficient expansion space all over the group, but particularly in the U.K., France and Germany. I'm particularly proud and excited about the development of Just-Evotec Biologics. The founding and original concept of Just was to create a disruptively agile, flexible and transformationally cost-effective method of biologics discovery, development and manufacture. Very few of us realized how prescient this would be in 2020. Consequently, Just-Evotec Biologics had a very good feel first year in terms of scientific development, such as with the development and publication of J.HAL, a unique AI-designed antibody library, as well as strong new business acquisition. The first J.POD or facility of the future is on track for opening in the second half of this year. And we're very pleased today to announce that now is the time for us to begin the construction of the second J.POD, this time in Europe. On Page 29, I asked the question, why is now the right time? Well, global demand for flexible biologics capacity continues to grow rapidly, and we already see this in the demand pipeline for J.POD 1. Europe represents the second largest biologics market after the U.S.A. and the pandemic has heightened awareness for the need for local supply and supply chain security. And lastly, following the acquisition of the Toulouse site in 2020, we have the operational synergies and efficiencies as well as the space to place this important strategic expansion in Toulouse, France, subject to local environmental, planning approvals and support. This is the next logical step in the long-term construction of a network of biologics facilities of the future, and more information will follow in the coming weeks on this very exciting development. Page 30, I highlight that the J.PODs are the ultimate physical representation of the transformation of biologics discovery and development continuum. If you like, the end of the pipe result of using cutting-edge predictive science, AI, machine learning and J.DESIGN capability to drive dramatic improvements in quality, speed and cost effectiveness of the entire value chain. Full integration and exploitation of this concept was in the founding DNA of Just and has also been at the heart of Evotec's values for many years. Therefore, Page 31, we have extended the holistic concept of comprehensive predictive science, computational tools, including AI and machine learning, to the fully integrated value stream of the small molecule inventive process, from selecting the right molecule and modality through iterative optimization and to development readiness prediction. The unique combination of cutting-edge computational tools and power, available data and models, knowledge, expertise and full integration of all of the highest caliber technologies to generate new insightful data, puts Evotec in a unique position to transform and disrupt the integrated R&D paradigm, the innovation hub. On Page 32, we show that this comprehensive and unique offering resonates with our partners very strongly and is the basis for our continued double-digit growth of base business. Whether it's expressed in the attraction of new partners or the expansion and retention of existing relationships, we're witnessing ongoing and productive growth in all indicators. And not shown here, but also clear to us is that the long-term value of deals accessible to us is also going up due to the recognition of our unique combination of disease know-how, expertise, full suite technology and predictive power. And we expect these aspects will continue to drive success and growth in the year ahead, and contribute to the co-owned EVOroyalty pipeline expansion in the long run. And with this, thank you very much from me, and I hand back to Werner.

Thank you very much. With this, we go forward to Page 34. Here, you will see our ESG and sustainability report in a picture. And what you should notice that for us, terms like ESG and sustainability are no longer buzzwords that we have to mention on calls like this, it is for us a daily fully appreciated and lived reality. We are convinced about the fact that we are not only on this planet to save and improve the lives of patients, but also to reduce our footprint. And with this from 3 to 4 years ago, where we have been nowhere in our ESG reporting, but also in our awareness of the footprint that we can make as a company, we made a step function to lead this field of ESG reporting and also to lead this field of ESG awareness. Special thanks here to Volker, who did a lot of work in making us here a leader in the future. When it comes to Page 35 of this presentation, you should see our outlook. And what is important about our outlook is that we are building a long-term franchise and a long-term vision for this company. With this, to not only look at 1 year to come, but look at the full row that you see here. Nevertheless, 2021 will be great. We expect group revenues to grow in a range of €550 million to €570 million. This would, at unchanged exchange rate, compared to €565 million to €585 million. This assumption is based on the current orders at hand, foreseeable new contracts and the extension of contracts as well as prospective milestones that we are expecting this year. Evotec expects the adjusted EBITDA to grow to €105 million to €120 million. At unchanged exchange rate in 2020, this would represent a growth to around €115 million to €130 million. This projection takes into account the increasing expenses from promising R&D projects and the ramp-up of the J.POD 1, and also now and that's news of today, including also some costs for J.POD 2. And you will also see that in our R&D expenses that we are growing substantially, and here, our guidance is between €50 million and €60 million in '21. When you look at the company of today, on Page 36, you do not only see a strong platform, you also see strong numbers bringing us forward. If you go to Page 37 of this presentation, you should appreciate the fact that we have started the year with very substantial transactions. And this is just the beginning because we have not even closed Q1. So you will see way more to come this year because we are accelerating our pace on the R&D-driven Autobahn to Cure. If you go to Page 38, let me invite you to continue to follow us, and it is important for us that you feel the vroooom, which is behind the data-driven Autobahn to Cures because it is you who ultimately go this path together with us. And with this, let me, for Page 39, also invite you to our next upcoming Capital Markets Day, which will be held on the 20th of April, and where we want to give you an update on more details of Action Plan 2022 and some exciting news of our platforms. With this, let me thank the company, let me thank my team, and let me thank you and invite you to questions.

[Operator Instructions]. First question is by Joseph Hedden of Rx Securities.

Congrats on the strong 2020 results. Just wondering if you could give us any guide on the longer-term expectations for your gross margin as revenue mix continues to evolve, especially with J.POD coming online in H1 and now a second European facility? And then staying on that topic, what the CapEx expectations given -- for 2021, 2022, given you're now planning J.POD in Europe? And is there any kind of financial support from other sources, perhaps European Governments, et cetera, that is supporting that?

Thanks, Joseph. On the third question, we are in very intense and very good discussions with multiple organizations at this stage to fully appreciate the disruptive power of this technology and also our intention to that, but we cannot comment in detail. But clearly, there will be support. I can already say this, yes. And on the second question, I'll hand back to Enno. But on the first question, let me tell you that what you see as gross margin today is, of course, if you look at the overall company, always volatile depending on how many milestones we achieve. But when you look at the overall gross margin for our base business and given the increasing revenue mix and the better revenue mix of the company, you will see gross margins improving going forward, especially also with the business lines that we have opened and are opening because they typically have even better gross margins than our historical business. And on the CapEx question, I hand over to Enno.

Yes. Thank you. Pleasure having you on the call, Joseph. So CapEx for 2021 basically will be twofold again. So we will have a normal CapEx, which is growing. Just maybe as a brief reminder, 2020, we in total had the CapEx around €100 million, €99 million to be precise. And this year or 2021, we will see a CapEx of roughly €40 million to €45 million in the range of the normal CapEx for expansion and growth of the organization. And then we will have ordinary CapEx in terms of a second stage of expanding the J.POD in the U.S., finalizing it and other expansions at the other side, which should be in the range of €75 million to €85 million in total.

The next question is by Falko Friedrichs of Deutsche Bank.

I have three questions, please. The first one would be on your diabetes beta cell project. Could you update us on your plan here over the next few months and the time lines for that project to the extent possible? Then secondly, on J.POD, could you update us on the go-live time lines for J.POD 1, when we can expect that to happen? And then on J.POD 2, when could this site be operational if you start setting it up now? And do you already have committed customer interest for that European facility? Or do you build it first and then try to acquire business? And then my third question is on your guidance. So when I look at your 2021 guidance, it implies fairly similar growth for revenue and adjusted EBITDA in constant currencies. Now in light of your ongoing expansion and investments, is that a pattern that we should expect for 2022 as well, so not too much operating leverage next year as well in light of these investments?

So thank you, Falko. Good to hear you, again. Long time no see, would be also great to see you sooner or later again, but that applies to everyone on the call here. On the fourth question that you raised on the guidance, you should not see this as a pattern. You should really see this as a very clear reflection of where we are today, but you should increasingly see more dynamic of our business going forward, as you can also feel it. And just if you look at Q4 alone, you see a glimpse of that momentum in the business right now. So that's just to that point. On your first question, if I may quickly comment. So we are fully committed, first of all, to our beta cell and all cell initiatives that we are doing on the platform at this stage. CureBeta is an amazing project that we are pushing forward, where we are exploring at this stage, multiple routes forward on different levels of, I would say, innovation degrees, for example, when it comes to devices and other aspects of the full treatment. And we want to go here for a leading approach in the industry. And at this stage, we are very happy that we have everything that it takes to bring this project forward on our own platform. At the same time, we are exploring also company formations, but also deal formations around our cell therapy efforts, which are ongoing and will continue to guide us through '21. But as I said before, everything is at full speed at this stage because all we need is on our own platform or in license from partners, for example, when we are exploring devices. J.POD 2 will be fully operational in the second half of '21. And this -- J.POD 1, sorry. And -- that would be great because that would be the first construction happening before we have even started. But J.POD 1 is fully operational still this year, so second half. And it's really fantastic that we despite -- and you can imagine what construction at this stage on the West Coast in Redmond means. So it's really amazing what the teams are doing to getting ready to basically also filling up the order books for this plant, where it's also great to see the trust of our partners because they give their compounds and their babies into our hands before they have even seen the full facility operational. And that's really a testament to the fantastic quality and the track record of our team there that this is happening as we speak. And with this, we're also so confident that despite the fact that, at this stage, we have no customer because no one even knew until yesterday that we are building J.POD 2 in Europe, that we will have very soon also here a lot of customers coming. And let me just illustrate this a bit because you should be aware of the fact that, of course, for therapeutic antibodies, especially also in the field of COVID, Evotec has built a special expertise. And that's also why our Redmond facility is high in demand, but that's only one source of that demand. But also here for infectious diseases and also COVID-related aspects, we are building J.POD 2 because that will be, especially for therapeutic antibodies, a long-term theme in the industry. We are very convinced about that. And J.POD 2 will potentially also have a feature that it will be able to be a very important part in the absolutely limited cell therapy manufacturing capacity in the industry, but also in the potential gene therapy manufacturing capacity in the industry. So that's why once we have really started the full buildout of that, that will be then the directions where we are going. I hope that answers your questions. Thank you, Falko.

The next question is by Charles Weston of RBC.

I'll kick off with three, please. First of all, can you give us some color on the progress of Exscientia. And specifically, after its recent fund raise, what that means to your balance sheet position and ownership value? My second question is more broad about how you think about managing your EBITDA progression? Clearly, the Execute side is growing strongly and has stable margins. And you decide to reinvest some of that cash into R&D. Some investors might want more EBITDA progression, some might want more R&D investment. So just can you think about how you manage this on a sort of go-forward basis over the next sort of 3 years, how much do you let trickle through? And then lastly, out of your guidance, could you give us a range of how much milestone you might -- or milestone payments you may expect to receive this year, please?

So Charles, thanks for the questions. The first question will go to Enno. The second question is a very simple answer because we are building a long-term value company. And with this, the short-term optimization of EBITDA would just not be the right service to our investors. And with this, we are investing into disruptive platforms, for example, HAL is a machine learning platform in antibodies when these technologies are ripe to be progressed forward or we are bringing PanHunter and PanOmics to the market when they are needed in the industry. So there is no, I would say, at this stage, tailoring of our EBITDA, for example, that we are handling around €100 million or whatever, it is a function of what is needed to make this company long-term successful. And it's, of course, fantastic that we are discussing this, not on a "closely breakeven situation". We are discussing this on a highly cash-generating platform. We are discussing this on a highly profitable company. And we are discussing this on a company, which has spent more money in R&D than ever before in 2020, and will spend more money in R&D in '21 because of this full commitment for our long-term plans. And that's really the answer to our investors who are fully supporting this, when you look at, for example, the endorsement of Novo or Mubadala, to build this long-term vision of a company that is profitable, but also invests in disruptive platforms. Sorry for the long answer, but it really goes to the heart of what we are building, and it's clearly not short-term. It is very long term. And when it comes to the guidance range of milestones, I think, you should see a year with more milestones since last year. That's the guidance I can give you. And at the other side, you should see milestones are defining our business. Milestones are volatile, will continue to be volatile and really should be seen as something where there's a massive upside in the company every year. But even if they would not come, this company would have a very strong year also from its EBITDA perspective. And I think that's the beauty of that. And on the Exscientia question, how we deal with this situation in general, I'll give over to Enno, but let me first mention that at this stage, we have more than 20 fantastic co-owning companies and not only one company, which is, of course, especially great because it was one of our first investments, that's Exscientia.

Pleasure to take over. And yes, I mean, we have seen the recent financing rounds, which so far do not change our accounting here significantly in that regard because we try to only account if profits are really recognized or realized at the end of the day. So there's no significant change in that regard right now.

So can I just ask a quick clarification then. What is the value you're holding in Exscientia now versus what it was before the recent fundraise?

So we have the balance sheet value, so to say, which is around -- or above €20 million.

But of course, if you have seen the latest round, you can imagine that there is some side in there.

Right. I mean, to be more precise, I mean, we have different effects here. On the one hand side, obviously, we have the core balance sheet value. But as we recognize this as at equity, obviously, the losses also go into this consideration, which cumulate over the time.

Understood. Sorry, just what is the post-money value of Exscientia? And how much do you own?

We own, of Exscientia, about 19% at this stage, but we are not allowed to disclose post-money valuations of this company, like we are also not allowed to disclose any post-money valuation of any other company that we own.

Next question is by Naresh Chouhan of Intrinsic Health.

On Just-Bio, when we spoke last year, I think you sold about 50% of the capacity, and that was on just two trains. Can you please update us whether you now have 6 trains up and running. I think that was the capacity, you could fit 6 into the Seattle plant. And if so or how much of that capacity has already been sold or whatever capacity you have that's up and running, how much of that has been sold going forward? And then for also on Just, WuXi a couple of days ago said that they can deliver biologic product for customers at $80 per gram. And that's in a 12,000 liter bioreactor. So they're increasingly able to produce cheaply, even -- I mean, obviously, not as small scales as Just but relatively small scales. Can you help us understand where you are on the cost curve on a program basis, just to help us understand how much of a differentiation you have versus some of the other players in the industry? And then on the Takeda RNA deal, is that an exclusive deal? Or can you work with other companies on RNA discovery? And if it is exclusive, then is it a fair assumption that we should see much larger mass doses than we've seen with, let's say, Bayer, for example? Just because you're adding a lot more value there?

So let me, on the Takeda deal, to illustrate this a bit, hand back to Cord. And Craig will then give you a bit more illustration on capacity and the buildup of Just. But one thing before I hand over. We clearly do not want to compete or be compared to capacity plays in biologics. That's not what we are building. We are building access in precision medicine. So that's why the -- it's like comparing apples and eggs in a way or apples and pears, I think that's what you say. But I'll then hand over to Craig on that. But first, Cord on Takeda.

Yes. So thank you very much for the question. And the very simple answer is, it's clearly not an exclusive deal for Takeda. Actually, on all of these platforms that I mentioned, we only give exclusivity away on targets where we create upside to basically our co-owned pipeline. So it's only exclusive as for the specific target that we jointly progress, ultimately. And I mean we're very confident that you'll see other examples of deals here in this space on small molecule RNA targeting in the future.

Thank you. Craig?

Yes. Okay. Thanks, Cord. In terms of the trains and capacity, just to make one precision. So the whole J.POD building in Seattle and indeed our plants for the second one, you're right that the footprint is able to accommodate up to 6 trains. But the initial construction has a commitment and CapEx commitment and so on, associated with the first 2 trains, so that we can build out as demand builds up in effect. And that's actually one of the design concepts behind it, is that one can create capacity rather flexibly and on demand and in a very rapid manner. In terms of capacity, which is booked, those 2 trains at J.POD 1 are pretty much 90% booked out deep into 2022, which is also part of the reason why we feel reasonably -- we were very confident about our pipeline flow and deal flow and volumetric consumption and capacity utilization. And then if -- at the appropriate times, we can add additional trains rather rapidly in fact. And then just to build on Werner's comment about sort of cost per gram and volumetric production. So of course, the whole design concept behind the very integrated end-to-end view in Just is that the J.POD is just the end result of a series of very intensified process investigations and improvements to give rise to grams per liter per day as continuous bioprocessing. And that completely transforms how rapidly it can be set up and what scale can be produced in a short period of time. And we believe that offers a really premium and needed offering in the marketplace.

So sorry for not being precise on the per gram costing here, but that's -- again, it would be not guiding you to the right concept at this stage.

The next question is by Victoria English of MedNous.

I have three rather broad questions. The first concerns the concept of partnered pipeline. Werner, could you tell us what happens when a product that's been partnered reaches a pivotal stage? Do you then take a decision as to whether to drop out and take your profit? Or do you wait for the product to go on to the market? What is the strategy? The second question concerns the statement about symptomatic versus molecular profiling. I'm wondering -- what bothers me here is the concept that you can mechanically or biologically determine the cause of the disease without maybe consulting the patient, which is normally what I think of when you talk about symptomatic. Is there a way to capture real-world information into your model for molecular profiling? That's the second question. And the third question, again, is about the precision medicine platform and the concept there. And the question is, do we really understand enough about disease resistance to be confident that we know what to target?

So fantastic questions. Thank you so much, Victoria. Questions 2 and 3 will go to Cord. But unfortunately, he will have to be brief because this will take a full lecture. But the simple answer on your first question is, I think, briefly given because the strategy of the company to build the largest or one of the largest royalty ever. So with this, we want to be part of the journey of a drug, but we typically do not sponsor clinical trials and we do not run clinical trials. We don't have the capacity for that. So that's why for us, the pivotal point is to hand over drugs latest once the running of clinical costs of clinical trials would have to be financed to our partners and then keep our ultimately royalty shares in these projects. And that's also why we can leverage this platform not only with one partner, but with multiple partners in the industry. And that's why we are building, so to say, this co-owned pipeline out there. And that's hopefully answering your first question. And to questions two and three, back to Cord.

Yes. So thank you for your questions. So I'm going to try and keep it short. But in -- the essence of this is that the symptoms and how the patient feels, ultimately, of course, will stay to be an important part of the process of diagnosis. But ultimately, dementia, for example, can be caused by many, many different causes, including inflammation, but also an infection and God knows what. And ultimately, it is ultimate -- it is molecular profiles that will decide what are the causes, the underlying causes, in the disease cell types. And it is only if you understand these molecular changes and the digressions that you can then specifically and precisely intervene with the causes. So it is really ultimately a -- the platform that we're talking about is ultimately a platform that really redefines diseases according to molecular profiles in individuals' tissues and cell types to really find the appropriate intervention points. So it doesn't -- I mean if you have a headache, the question is where is that ultimately coming from? What's the cause, right? And it is -- the symptom is just a symptom, that's just the symptoms. And the same is true in many areas. When you lose muscle mass, muscle wasting disease, there can be many different molecular causes. And it's important to identify the molecular -- underlying molecular cause and then intervene on the appropriate front there.

And then the business about resistance, that was the third question.

Yes. And -- I mean, the business about resistance is actually, even goes more on to the molecular level. In order to be able to target resistance, you have to not only understand what is the disease on a molecular level, but then you also have to see what changed during the disease process, progression that led to the resistance of a -- against a certain drug type. And that needs to be then not only on a cellular level, but you have to go down to the level of even -- have to have been changes in the protein that is usually targeted by this drug or is it just not expressed anymore, is it interacting differently. So this is actually taking it one level further, where you have to really understand on the detailed molecular mechanisms on, like I said, protein RNA DNA level to get -- to go after these.

Thank you very much. I have to cut short a little bit for time reasons only, but I'm more than happy to facilitate a deeper discussion here Victoria, if you want to go deeper. And with this, I'm asking for the audience, if there is another question in the room because we could take one more.

The next question is by Mohamad Vaseghi of Frankfurt Main Research.

So I just wanted to simplify my question and it's about small molecule for RNA targeting. Well, my simplest question is where exactly Evotec wants to go? I mean -- so in which indications?

I think that goes to Cord and is a very good and broad question.

Yes. Thank you for the question. So with these kind of platforms -- actually, let me start the other way around. As you can see, Evotec is very broadly investing into various areas -- or various indication areas. And here, in these indication areas, we're trying to work, in particular, with patient data and patient assay systems to identify molecular mechanisms that are directly associated with the disease process. And when you do this, you come across target candidates and these target candidates are sometimes targets that can be easily addressed or fairly straightforward to -- they can be addressed via small molecules, sometimes via antibodies. But sometimes, that's -- those modalities just don't work. And sometimes even antisense doesn't seem to be the right modality then. And then in those cases, where you basically feel like there is -- it's very difficult to target these molecular targets via more traditional means, then we resort to, for example, the small RNA targeting platform because there's just -- it's very difficult to get to this target in any other way. And that's sort of, as I said, that basically opens up target space that is less traditional, sort of what used to be the undruggable space. And therefore, it's -- we just use it in areas where we feel like, well, the more traditional means won't work. But here, we still have a tool to go after what we believe is the most disease-relevant target in a particular disease context.

Thank you. If there is no further question on the line, I would...

There's another question by Christian Ehmann of Warburg Research.

Just a quick one. Concerning the BMS project, a quick reminder that this originated from your iPSC pipeline, am I correct? And if so, is this rapid development indicative of the overall pipeline which you see for the progression through the clinical -- preclinical stages?

So thanks for the question. When you talk about our BMS partnership, I think it is worth mentioning that we have multiple BMS partnerships. The one that you're referring to is our iPSC partnership in neurodegeneration. But at the same time, there is -- many people don't have this that much on the radar. There is a massive collaboration in protein degradation in oncology together with BMS. And there are multiple other partnerships with BMS that we are currently running and bringing forward. So it's really an area where we have more than 5 large alliances ongoing with BMS at this stage. In the iPSC-driven neurodegeneration pipeline that you are referring to, we are very happy that with this partnership now ongoing for more than 5 years, we are progressing into the clinic this year, as Cord already mentioned. This shows you that from a basically target starting point to the clinic, we did this in an amazing time line with a degree of novelty, which is fantastic. And with this, we also are able to prove that with iPSC-derived targets, we do not only have a discovery concept, but also a clinical and with this product pipeline building concept. And of course, if you multiply the speed of here the first visible concept out of this pipeline, like the iceberg picture tells you, you will see multiple more assets coming out of this partnership into neurodegeneration on iPSC cells. And at the same time, you should appreciate the fact that our iPSC platform is not only targeted towards neurodegeneration, but also towards neuro-developed mental diseases, towards eye diseases, towards kidney diseases, towards heart diseases. So that's why the platform thought of bringing this into multiple indication areas is just at the beginning of what we are doing with this iPSC platform. And here to link this also to footprint and what we are doing, we are in the process of evaluating really the construction of a lighthouse of iPSC research here in Germany, which would then also give us the capacity to do much more than what we're currently doing in this field.

There's no further question.

Which is on the one hand side, a pity, because we love your questions. On the other hand, it's great because we have kept you now long enough on the phone line. And we want to thank you. We wish you all the best. We hope to see you being vaccinated soon. It is a great thing to be vaccinated, by the way. And with this, all the best. Bye-bye.

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