Evotec Announces First Quarter Results and Corporate Development Update
- Strong operational performance driven by successful Discovery Alliance Business o Major set-backs in clinical development programs, especially failure of EVT 302 in smoking cessation (after period-end)
- Restructuring program "Evotec 2012 - Action Plan to Focus and Grow" implemented; drug discovery and development operations re-engineered (after period-end)
- New strategic partnership with Roche in treatment-resistant depression initiated o Acquisition of Zebrafish Technology to further strengthen Discovery Alliance Business (after period-end)
- Changes in Top Management and Organization
Strong operational performance driven by Discovery Alliance Business (DAB)
Evotec's revenues for the first quarter 2009 were EUR 8.2 million, up 13% from last year's level (2008: EUR 7.3 million). This is mainly the result of strong underlying revenues from our discovery alliances business, higher income from licenses as well as a portion of the upfront payment from Roche (EUR 0.2 million), of which the recognition will be spread over the expected duration of the Phase II study with EVT 101. Gross margin improved to 36.2 %.
Evotec's operating loss increased to EUR 20.2 million primarily due to an impairment charge in the amount of EUR 6.6 million and restructuring expenses of EUR 1.4 million recognized in the first quarter. Operating loss before those extraordinary items improved by 15% to EUR 12.2 million as a result of a higher gross profit and lower R&D expenses.
Liquidity, which includes cash and cash equivalents (EUR 42.2 million), short-term investments (EUR 27.3 million) and auction rate securities (EUR 9.5 million), at the end of March 2009 continued to be strong and amounted to EUR 79.0 million (December 31, 2008: EUR 92.4 million). This amount does not include the upfront payment from Roche in the amount of $10 million (approximately EUR 8 million) which was paid in April to Evotec for the option to buy back the EVT 100 compound family.
Net loss amounted to EUR 21.8 million (2008: EUR 13.8 million). The negative impact on the net loss below the operating line resulted mainly from two non-cash items: the valuation of the put option for auction rate securities (EUR 0.6 million) and a foreign exchange loss of EUR 1.6 million as a result of the repayment of share capital related to the investment in Evotec (UK) Ltd, which was previously recorded as a component of equity and reclassified into the Company's Statement of Operations in Q1 2009.
Evotec confirms its financial targets for the fiscal year 2009 published on March 27, 2009.
Two major milestones missed with EVT 201 and EVT 302, P2X7 progressing according to plan, delay in VR1
During the first four months of 2009, Evotec announced that it had missed two major milestones with its lead development candidates. Evotec did not achieve its partnering goal for the insomnia drug candidate EVT 201. In addition, the results from the Company's Phase II proof-of-concept study investigating the potential of EVT 302 as an aid to smoking cessation showed no improvement in the quit rate compared to placebo. Phase I clinical studies with Evotec's small molecule P2X7 receptor antagonist, EVT 401, for the treatment of rheumatoid arthritis and other inflammatory conditions is progressing according to plans. Evotec expects to release results in mid 2009.
In the first quarter of 2009, Evotec's partner on the VR1 collaboration, Pfizer, disclosed that the first small molecule VR1 (vanilloid receptor 1) antagonist that was in Phase I testing to treat pain did not yet meet the optimally required target profile. Pfizer will continue the collaboration and develop a follow-on antagonist that is in late-stage discovery. This means a delay for this program resulting in an impairment of EUR 6.6 million.
Restructuring Program "Evotec 2012 - Action Plan to Focus and Grow" implemented - drug discovery and development operations reengineered - cash reach extended beyond 2012
Evotec conducted a thorough strategic business review which led to the implementation of the "Evotec 2012 - Action Plan to Focus and Grow" in March of this year. The core elements of this plan include:
1. Strengthen the discovery alliances business
2. Refocus the pipeline on most valuable assets
3. Build strategic alliances on more projects available
4. Significant reduction of operating expenses and strategic risks
Consequently, strict cost containment measures were implemented throughout the organization which will materialize starting in the second quarter 2009. Headcount in administrative functions was reduced by 20% with immediate effect. In addition, the setback in the progress of Evotec's clinical pipeline has resulted in a re-organization of the clinical development group. Evotec has reduced headcount in this team by approximately 50%, but kept a fully functioning clinical development group to support all priority projects.
On May 5, 2009 Evotec announced that it had decided to re-engineer its drug discovery and development operations. The continuing strength of a successful Discovery Alliances Business gives Evotec the unique opportunity to more efficiently leverage its research and development infrastructure.
As a consequence, all Evotec proprietary programs will be managed through its European operations. This will lead to a headcount reduction in research by more than 50% and an expected minimum of additional EUR 10 million annual cost savings from 2010 onwards. As a consequence, the US operations in South San Francisco, California will be wound down with immediate effect.
As a result of these measures, the Company expects its annual cash burn rate to be reduced by a minimum of 30% and its cash reach to be extended beyond 2012.
High value strategic partnership with Roche to develop EVT 101 - deal value exceeding $300 million
In March 2009, Evotec signed a partnership with Roche for the development of the EVT 100 compound family with a total potential deal value exceeding $300 million. In April, Roche has paid Evotec an upfront payment of $10 million and will fund the Phase II clinical study for EVT 101 in treatment- resistant depression and a Phase I program for EVT 103. Roche has an option to buy back the entire EVT 100 compound family after completion of the Phase II trial on EVT 101. If Roche exercises this option, Evotec will receive a $65 million payment from Roche plus substantial milestones and double-digit commercial payments. The Phase II study is expected to start in the second half of 2009.
Acquisition of zebrafish technology to further strengthen Evotec's world-class leadership role in discovery alliances
On May 7, 2009, Evotec announced that it will acquire the zebrafish screening operations of Summit Corporation plc for £ 0.5 million in cash. This capability is valuable to drug discovery as it provides important whole organism data about the safety and toxicity of drug-like molecules at an early stage of lead optimization. Through this small acquisition, which is expected to add approximately £1.5 million revenues in 2010, Evotec is enhancing its world-class drug discovery platform in multiple areas.
Changes in Top Management and Supervisory Board
Dr Werner Lanthaler was appointed as new Chief Executive Officer; Dr Walter Wenninger has been nominated for election as New Supervisory Board member; and certain Top Management functions have been reorganized.
Evotec will hold a conference call today at 09.30 am CEST to discuss the financial results as well as progress of the first quarter of 2009. Dr Werner Lanthaler, Chief Executive Officer, will lead the call.
Conference call details:
Date: Tuesday, May 12, 2009
Time: 09.30 a.m. CEST, 08.30 a.m. BST, 03.30 a.m. US time (East Coast)
+49.(0)69.5007 1308 (Germany)
+44.(0)20.7806 1955 (UK)
From the US: +1.718.354 1388
Access Code: 8354186
A simultaneous slide presentation for participants dialing in via phone is available at www.equitystory.com, password: evotec0509.
To join the audio webcast and to access the presentation slides you will find a link on our home page www.evotec.com shortly before the event. A replay of the conference call will be available for 24 hours and can be accessed in Europe by dialing +49.(0)69.22222 0418 (Germany) or +44.(0)20.7806 1970 (UK) and in the US by +1.718.354 1112. The access code is 8354186#. The ondemand version of the webcast will be available on our website: www.evotec.com - Investors - Financial Reports.
Evotec is a leader in the discovery and development of novel small molecule drugs. The Company has built substantial drug discovery expertise and an industrialized platform that can drive new innovative small molecule compounds into the clinic. In addition, Evotec has built a deep internal knowledge base in the treatment of diseases related to neuroscience, pain, and inflammation. Leveraging these skills and expertise the Company intends to develop best-in-class differentiated therapeutics and deliver superior science-driven discovery alliances with pharmaceutical and biotechnology companies.
Evotec has long-term discovery alliances with partners including Boehringer Ingelheim, CHDI, Novartis, Ono Pharmaceutical and Roche. The Company's has a P2X7 antagonist for the treatment of inflammatory diseases in clinical development and a series of preclinical compounds and development partnerships, including a strategic alliance with Roche for EVT 101, a subtype selective NMDA receptor antagonist, for use in treatment-resistant depression.