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

Thank you so much. This is Werner speaking from Evotec. Good afternoon and good morning from sunny Hamburg. We are here presenting to you the nine months results of Evotec, which we have highlighted under rapid progress on the data driven Autobahn to Cures. We have uploaded a presentation for your convenience, and please follow this presentation throughout this 35 minutes that Enno and I will conduct for you. When you go to the first page of this presentation, you should see that I'm here together with Enno, our CFO; and Craig and Cord are also on this call and they will be happily answering questions after the initial presentation. When you go to Page number 4 of this presentation, you should see that we are in a strong position. Actually, it's maybe fair to say that the company is in a very strong position. Why do we say this? Because the overall performance on all names of our data driven R&D Autobahn to Cures is strong. Yes, it's very strong. Q3 shows many important and consistent steps forward. So overall, we see our EVO Innovate base business -- sorry, our EVOiR&D base business in a very strong shape. We see positive momentum across all business lines. And we already see very good business momentum into 2022 and given the long-term nature of our contracts also into '23. Page 4 also shows you some single events that I want to highlight that are supporting our unique business model. Let me highlight here. For example, the recently announced clinical start with our partner BMS, with a highly innovative target in neurodegeneration. Let me also highlight here the progress that we made overall in building our EVOroyalty pool with multiple clinical events that are either showing even more visibility towards the market,…

Thank you, Werner, and a truly warm welcome also to all of you from my side. Good afternoon or good morning, respectively. And let me start, I’ll continue on Page number 8. And here with the nine months 2021 numbers, which show an excellent 20% increase on our revenue line. And this is substantially pushed by the positive development of our base business and the realization of two BMS milestones in September 2021. Adjusted for the FX and for portfolio FX, we even would recognize a 26% gain in revenue growth. And I will come back to the further analytics of the growth factors on Page 12. The gross margin amounted to 23.1% lower than last year's 24.7% and this is mainly due to the after mentioned and end of the Sanofi subsidy for our site introduced after Q1 2020 and adverse FX effects in 2021. If adjusted for both respective FX, gross margin 2021 year-to-date would come in at 24.6% versus 22.9% in 2020. The planned increase in unpartnered R&D expenses by 28% leads to an -- sorry 16% growth in the overall R&D expenses. This development is especially driven by further enhancing our multiple platforms as Werner just indicated and accelerating our co-own pipeline. The increase of 20% in SG&A expenses versus last year’s mainly caused by increasing headcount and costs for our secondary NASDAQ listing. And the rise in this position in January reflects our continuous growth efforts, for example, for ramping up our new operational J-POD in Redmond U.S. and also enhancing ongoing integration tasks and ensuring overall growth opportunities. The other operating income stands slightly above last year's level and contains two main components, basically, as already reported in the past quarters and past years. A, R&D tax credits, and B, the recharge for our…

Thank you, Enno. With this may be one short step back first before we go forward. A quick reminder of the cornerstones of our strategy, because it is important that you should see that all pillars that power our innovation hub are coming together extremely nicely at this stage. Our integrated EVOiR&D is going forward and delivers more projects than ever and with this we come to scale and scale effects in our business. Our precision medicine platforms, EVOpanOmics, EVOpanHunter, and especially our induced pluripotent stem cell platform is allowing us to go to the absolute frontier of precision medicine and with this to improve probabilities of success like it has never been done before. Our network of biologics and our network of J-POD, which we summarized under EVOaccess is coming together very nicely and here pushing the go button in August '21 was clearly a highlight this year. And we also see that we are now going operational very nicely in our biotech strategy. In all modalities coming together with EVOcells and EVOteams and all other modalities that we bring to bear on our Autobahn to Cures allows us to put the best modality behind every target that we are putting together into corporations in the industry. So with this, the claim of building the sharing economy within R&D is truly fully substantiated. How do we then put this forward into a business model that we make the right business model for every partner to optimize speed and value for both partners. With this we had a Fee for Service business, and of course, our strategic long-term goal is to build a co-own strategy, which results into co-owned assets and ultimately into the largest royalty pool that has ever been built in the industry. And if you go forward,…

Thank you. We will now begin our question-and-answer session. [Operator Instructions] Our first question is from Joseph Hedden of Rx Securities.

First one on guidance. Things you reported year-to-date revenues of 431 million to get to the top end of your revenue guidance is about 140 million away now. And you've booked 116 in Q3, generally being as Q4 is quite strong for Evotec, is it fair to say that guidance on the top-line is now pretty conservative, or is there some kind of effect here that I'm missing?

Maybe I hand this over to Enno, because he's the conservative guy.

Thank you very much, Werner. And welcome Joseph on the call and indeed, currently, from what we see, we are clearly expecting our revenue guidance to be on the upper part of our range.

But please bear in mind, we are fully invested at this stage into growth. And with this, I think the only question for us is how to translate strong top-line into bottom-line and here I think for us, we see that investing into growth for the long run is the right thing to do.

I just have one more on the recent payments for the great progress with the BMS neuro degeneration deal. Those additional program designations, could you perhaps explain to us a little bit more about what that means. Are they, is that the same kind of progress to recent R&D, these projects going to the clinic, how many [indiscernible] it will be great.

So maybe I hand over this question to Cord to elaborate a bit, how a mighty target alliance on our IPSC platform really works and how these payments come together, if you can take that question Cord.

Sure. So, the neuro lines with BMS started about five years ago and we are really immensely proud that from essentially a zero start almost, essentially from initial phenotypic screening approach. We have already introduced the first molecule into the clinic and essentially less than five years time, which is, I would say, it was a very ambitious timeline and be a -- actually it's a past our goals in that regard. And in parallel, as you could see from the slide runner presented, the alliance has consistently growing in terms of number of programs that we have added to the portfolio. And the most recent announcements of milestones achievements is essentially just elucidating on the fact that the number of programs now still at preclinical stages have reached key value inflection points, were essentially a BMS, not only not seen on the target, but related to small molecules. And here, these programs are going to be, I would say at least a couple years behind the initial line defining but we experimentally try out that the number of programs but also the state of the programs are steadily advancing and this is just another confirmation of that. Unfortunately, I won't be able to disclose neither target nor exact state of programs at this point in time.

Our next question is from Ram Selvaraju from H.C. Wainwright.

Hi, this is Boobalan dialing in for Ram Selvaraju, and thanks for taking my questions. Just a follow-up on the BMS partnership, I was highlighted previously. What neurological disorders are likely to make the most sense to target with 8683? And what level of risk mitigation with the prospect of simultaneous development in multiple neurological businesses provided? This is the first question. And second one with respect to your [indiscernible] agreement at University of Birmingham. So we presume you're targeting growing demand [indiscernible] factor to begin with small molecules. So unlike riders and racers various difficult to target from [indiscernible].

I'm very sorry, the line that you are using as a telephone line is for us very difficult to understand. So I didn't get the first two questions at all. Cord, did you get anything?

I think I got the first question regarding the most attractive indications for EVT8683 but that's, that's about it.

Okay, can I make a suggestion on, did you either send in your questions fast and we do this then directly via email, if we have them during the call, but the line is really not good. Sorry about that.

I could try to answer the first question.

Yes, maybe you can do that and the line has dropped. So he will dial in or he will send an email.

Okay. So very briefly regarding the first question if I understood the question correctly. It's about what are the most attractive and generous indications for EVT8683 that recently -- a molecule recently [indiscernible] and after IND -- successful IND filing. And here we are talking about a mechanism that is targeting the unfolded protein response pathways which is, I would say, a highly attractive mechanism not just for multiple neurodegenerative disorders. The current plan as far as I can disclose it is that we will move forward with BMS here on a more specific indication, most -- initially there will be, of course, a foreign studies, but then we intend to move forward most likely into more specific indications such as ALS in particular, is of interest, of course. But I would say, more generally, the mechanism has tremendous promise in many other neurodegenerative indications, including Alzheimer's. So it's really -- pretty broad.

Our next question is from Christian Ehmann of Warburg Research.

I have three questions at the moment. So, first, could you give us a little bit more detail about the extent of your supply chain issues you mentioned in the beginning of your talk? Second, I noticed that, while you talked about all the modalities you're offering, anti-sense, therapy is absent from the presentation and your mentioned here, so what's the point here? So is there anything you have changed in the past that you want to tell us at this moment about this or what's going on here? And the third one would be so, I mean you reported some considerable achievements with BMS partnership based on your IPSC platform? What kind of maybe other partnerships, other companies we can expect in the future to somehow broaden your customer base in this area?

Let me take the second question first, because there is, of course, full activity behind Evotec and anti-sense projects that we're working on our partnership here with Secarna is ongoing, our platform expansion together with Secarna is ongoing. So sorry, if I didn't mentioned it enough. But there is nothing that should hold us back from also being fully committed to this modality, because it's highly Novartis. It might be the right modality for certain targets, in certain indications. And that's I think, also the point we want to make. Every model -- every target deserves the best modality. And that's what you can find on our unbiased way of looking at the optionalities between modalities for targets. But there's nothing wrong on -- I should have probably stretched it even more, but please don't get me wrong. When it comes to supply chain issues, let me stay here on a general comment, and then hand over to Enno briefly. I think we see a world were coming all out the pandemic, many people have stockpiled many things. And of course, some people have stockpiled for some areas of their activities a bit too much and others a bit too little. And that's I think we are navigating through this is something that we have done extremely well so far. So I would not be able to mention massive delays or anything with our partners that's just not happening at Evotec. So really big thank you to the whole team, who is doing this within the company, extremely diligent extremely well. The second point I want to mention is of course with a huge exposure into the U.K. We are adopting here to a country which opted to go out of the EU, which doesn't make it always easier for us, but we are adopting extremely well. But these are of course all process changes that we are seeing now. And they all don't come for free. That's also something that we see. And nevertheless, the value that we generate by doing this is of course, significantly higher than the cost that we have to incur on top. Maybe Enno, if you have anything to add?

Not too much to add, I mean, it's really a mix of many parts. And the one clearly, as last example that Werner alluded to is the Brexit part, which is not a huge impact, but it makes life a little bit more complicated. Just to give an example, if you ship things rather fast on a high frequency like we do with SIP protects, and then all of a sudden you take instead of two days where you have perfect dry icing packaging, it takes four, five or six days and it's not as reliable then you have to rethink your logistical chain, and these things take extra efforts. Then we have COVID and COVID directly does not do a lot to us, but obviously, some basic materials, like for instance, just plastics for packaging are short. And you really have to make sure that you have in time sufficient supply of these materials. So really hedging these orders, looking far ahead, but also not overstocking, that's the balance that we have to go with. So it's all these little things that make it in total, a little bit more effort requesting demands.

And coming to the third question, I will then hand over to Cord -- but -- to introduce his answer. I had the pleasure of sitting yesterday together with our group here led by Sandra Lubitz, who is the basically platform group for the whole IPSC area. And once you go through an hour of understanding what the technology does, what full optimization does, you can see why we very often say this is just the beginning of this technology platform we do. And that's why one large area that we have highlighted so far is clearly just one out of many that will come in. With this I hand over to Cord maybe to elaborate a bit on that.

So generally, our IPSC platform continues to grow consistently. And I think the most recent evidence and I'm quite sure when exactly was that I think about three or four weeks ago that we announced this another expansion of this BMS into another area. So essentially another essays system that we have built, reflecting a disease patient – disease relevant, essay system for drug screening purposes. And here we've been very fortunate that our partner BMS opted in on many of these essays as we build them, but nevertheless, we are consistently also in discussions with our partners on the IPSC platform and continue to do so and we are fairly confident that we will sign additional contracts here in the future when exactly they will come, I don't want to comment on yet but we're pretty confident.

Yes. And maybe Christian to give a bit more color here. The two big partners has to be long-term dedicated partners in certain disease areas, otherwise, it doesn't make sense for us. So you should not expect here small companies partnering with us on IPSC platforms. It will be companies fully dedicated to certain disease areas. So I think, partner category number one here is the traditional top 20 pharma players that we're working with and the second category, which is increasingly important to us. And we are working also with, for example, the Huntington's disease foundation very, very closely on many technology areas, are mission driven foundations who we give access for their mission driven indications also on our IPSC platform, if this makes sense for them, because there's a long-term mission, there's a clear technological fit, and everything that these mission driven foundations need they can get with Evotec platforms. So that's also a business area, which is growing extremely nicely. And we also feel, a feel that our mission as Evotec to enable partners in finding new drugs is really as efficient as it can be. So that's a bit big color I can give you here. And don't forget our CureBeta project is also up and running, and progressing very nicely. And the same is true, as I already said, for self-serve no quality.

When you're talking about growth in the IPSC platform, do you mean amount of cell lines or what kind of KPIs do you use as a benchmark here?

So with 300 fully cultivated, fully active cell lines, the vision of creating patients in a dish, for example, is accelerating as we speak. So we feel that we here are coming to scale and with this, also coming to levels of this platform that it will be just making a huge world leading difference. That's, of course, one KPI. The second is how many essays are fully robust up and running. That's another KPI, because an essay is basically guiding us into a field of biology that we can then accelerate and translate into indications. So here we are, way beyond the 16 now, and that's very world leading, I want to stress this. And the third indication, of course, is then commercial input and output. And I don't know many investments that we have made, which we started in 2012. Where we are getting close, I would say to earning our money back already, when I only look at the BMS partnership, we probably are way beyond that already. But again, this investment will be multiplying many, many times into the future and has already multiplied if I'm correct you when it comes to the value that we have generate.

Our next question is from Victoria English of Evernow Publishing.

Werner, if I may return to the royalty pool. If I recall from our last telephone conversation three months ago, the pool is owned by Evotec, if I'm correct. What would your intention be once the pool gets substantially larger for the uses of these proceeds? Is it to invest in small companies, for example?

Thank you so much for the question. And welcome, again, on the line. Hope to see you again in person very soon. Let me say that first. Secondary, having the optionality with the royalty pool will, for us be, I think, really tangible, from the year '24, '25 onwards. So it's a bit early to make too many statements before we are there. But of course, conceptually, we have started to basically put the lowest cost of capital to work wherever we can. But to our mean with this, royalties for us will be basically highly profitable, at low cost of capital. And if we can reinvest this into companies that we are building, that's, of course, a fantastic use of capital. A second use of capital would be to say, some of these royalties will be capitalized, because we don't have immediate cash, which again, would be a great option to have, for example, also to return this to our shareholders in partial dividends or in partial returns, but that's just one optionality that's just one optionality in the long run. And the third idea of this royalty pool is to grow it and continue to full speed invest for example, into massive scaling of our precision medicine platforms, because I don't think that we are at the end of for example, monitor patient databases that have to be mined. I think we're at the beginning of that. So I think for the next decade, we have a very good idea of what to do with this in building a highly innovative company. And that's why I think we have started to think about it, but we are not there yet. I think that's also fair to mention.

[Operator Instructions] Our next question is from Chris Redhead of goetzpartners.

Kind of macro question here a little bit. The whole COVID vaccine effort has sort of, as far as I can work out to turbocharged nucleic acid-based therapies in a way that -- because it was quite sluggish for a long time, but it seems to given the sort of volumes of people receiving these kinds of mRNA vaccines and or have you. Are you seeing that kind of increase in activity in those therapies? And in the interest and acceptance of those therapies? And on the back of that, what are you -- what's your strategy in terms of expanding into that space?

Yes, maybe Cord, I can hand over the question to you.

Yes, so first of all, I think your federation is of course completely right. That nucleic acid-based therapies have come to front end center attention of pharmaceutical industry and he in particular messenger RNA based therapies as the messenger RNA based vaccines from Moderna and BioNTech are the most successful approaches here -- products currently. Nevertheless, I would say, first of all, I think we have to mention that at Evotec we do not pursue messenger RNA based therapies. Historically, we have not been in the vaccine business -- vaccination business, and messenger RNA based therapies for therapeutic intervention have not been successful at all so far. And it's still -- there are many approaches or many -- they have been tried in many areas, but so far, they have not been successful. And so this is why that's one of the areas we have not invested too much into, but rather full owned in and focus more on proven track modalities, where it's clear that there is going to be a benefit ultimately. With the advent of the messenger RNA based vaccines, however, it is something that we are evaluating and watching very closely if the opportunities for Evotec to move into that area, but we have not done any move as of yet, as of to date.

There is one more question which just came in via email, which Enno will take. Can you repeat the question?

That’s what I intended to do with a question, there's two parts. The first of all is about materials and costs for raw materials developing, so basically about inflation. And the second part is the same direction about labor costs increasing and going up? We clearly, obviously are monitoring both. And we do recognize an increase of cost in the base materials, that'd be ordering. But so far, still in a field, that is kind of moderate and brief, we can handle and I mentioned before already that we do have certain parts of our orders and an order very early with early stockpiling. So already today, covering a lot of the needs for 2022, but obviously, we also keep closely monitoring this field, as it can have a significant impact if it continues to grow beyond what we are currently seeing in the markets. And that's what we have on a regular basis -- And the same is true, also for recruitment of employees -- of new employees and also maintaining and retaining the existing ones, where we also clearly recognize that salaries are increasing. And there's a certain level of inflation, which we have to consider also in our future cost development going forward, going to be closely monitored and this is clearly on the desk here on management awareness.

Next question, please, if there's anything coming in from.

There are no further questions from the audio lines at the moment.

Okay. Great. If there are no further questions, let me please invite you to send in your questions whenever you want to spoke. And his team here, really doing the best of aligning your questions with what we can answer and how it would be paid back. That's one thing. The other thing is let me thank you so much for following Evotec throughout this year. Let we guarantee you that the year is not over yet, and that you will hear significantly more from us still in this last few months. But Christmas is coming for all of us. And this was the last conference call on quarterly results before Christmas. So on that note, let me pre glued to the year-end on this occasion as well. And lastly, let me already remind you again for our Capital Markets Day on the 2nd of March, which will then be the first conference call that we will hold in the New Year, because that's before our full year disclosure that we will make then later next year. Thank you so much. Have a great day, and I wish you all the best.

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