Evotec reports first-half operating profit, appoints new CFO

Evotec AG has reported a small operating profit for the 2010 first half – the first in its 17-year history. The profit, amounting to €0.3 million compared with a year-earlier loss of €29.1 million, comes a little more than a year into a major restructuring programme.

The restructuring involves both operational savings and a strategic shift into discovery. Since 2009 when the programme was launched by new management, discovery and development have been undertaken only in the context of risk-sharing alliances.

Speaking to analysts on 12 August 2010, Evotec’s chief executive, Werner Lanthaler, said the positive operating result was driven by a 33% increase in revenue to €25 million, which in turn, was the result of multiple milestone payments and licensing income. He said management was increasing its revenue guidance for the full year to €52 to €54 million, up from €48 to €50 million earlier.

Dr Lanthaler also announced the appointment of a new chief financial officer, Colin Bond, and the reassignment of its current CFO, Klaus Maleck, to head up licensing, development and mergers and acquisitions. Mr Bond was previously CFO of Novelis Europe, based in Switzerland.

Dr Lanthaler, who joined Evotec in March 2009, said management’s goal is “to bring this company into a new biotech paradigm.” This, he explained, means generating “solid top line growth” and supporting innovation over the longer-term.

During the first half,  the company’s six-year old discovery alliance with Boehringer Ingelheim yielded milestone revenue of €4.5 million. This included a payment of €2 million for the start of a Phase 1 study for a new treatment for neuropathic pain and €2.5 million for the entry of an oncology programme into preclinical development. In July, Boehringer paid Evotec another €2.5 million for the progression of another drug candidate into preclinical studies. Since 2004, the discovery alliance has yielded 10 milestone payments to Evotec.

“One swallow doesn’t make a summer. But we are very certain summer will come once we see the swallow,” the executive told analysts. He said that Evotec would achieve sustainable profitability by 2012 at the latest.

Aside from the Boehringer Ingelheim alliance, Evotec has partnerships with 11 other companies or institutions. In May, the German company entered into a new multi-year, multi-target discovery alliance with Genentech. And in late June, Evotec and Roche started recruiting patients for a proof-of-concept Phase 2 study of a new compound for treatment-resistant depression. The study, which is being fully funded by Roche, is being conducted in the US.

“Roche and we are very certain that the key parameters in achieving success in treatment-resistant depression is to get the quality of recruitment right and not just the speed of recruitment,” Dr Lanthaler told analysts. Screening for the trial is very rigorous with the ratio of screens to eligible participants running at about 10:1, he said in answer to a question.

Following the end of the first half, Evotec expanded its drug discovery assets with the acquisition of the privately-owned Germany company, DeveloGen. The acquisition, valued at €14 million in shares, plus performance-related payments, gives Evotec discovery assets in the area of metabolic disease and regenerative medicine. This complements the company’s existing assets in central nervous system disorders, pain and oncology.

Significantly, DeveloGen has its own discovery alliance with Boehringer Ingelheim, which Evotec will now take over. This is aimed at finding new small molecule drugs to treat insulin resistance for Type 2 diabetes. The other two main assets being acquired by Evotec are a partnership with Andromeda Biotech Ltd of Israel to develop a synthetic peptide immunomodulator for Type 1 diabetes and a growth factor product that targets beta-cell regeneration.

Dr Lanthaler called the beta-cell regeneration project “high science, high innovation and high risk,” which is currently unpartnered. Evotec expects to end the year with liquidity of more than €64 million despite outlays of  €2 million in cash for DeveloGen.

Asked if the company would seek another US listing for its shares in the future, Dr Lanthaler indicated not. “The last intention that I have is to go back to Nasdaq [the US over-the-counter market]. Liquidity these days goes to a company, independent of where the company lists. We would rather see ourselves performing strongly on the German TecDAX than on the US Nasdaq,” he commented. Dr Lanthaler and his management team took Evotec off  Nasdaq in 2009 as part of the company’s restructuring The company is currently listed on the Frankfurt Stock Exchange.

Copyright 2010 Evernow Publishing Ltd

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