Despite advances in medicine, the process of discovering new pharmaceuticals remains expensive and is often inefficient. A recent study conducted by the Computational and Structural Biotechnology Journal has concluded that the healthcare industry faces increasingly demanding challenges in delivering more cost-effective services exclusively focused on research and development. The German company Evotec AG (EVTG.DE) may have some answers.
Evotec provides drug discovery services and alliances to the pharmaceutical and biotechnology industry.
Its sole mission is to build a partnered product pipeline based on high quality drug discovery and science and technology through efficient collaborations. Evotec has had significant drug discovery innovations in its 20-year history.
According to Alpha Deal Group’s recent buy-side intelligence report, Evotec has generated 100 lead series, 30 pre-clinical candidates and 20 clinical compounds. It recently introduced a rich Phase 3-1 product pipeline, which includes first in class targets. The company has profitably been growing its business, driven by milestones and a strong cash position.
Core competencies
Alpha Deal Group’s recent intelligence brief asserts that Evotec has a significant value proposition within the areas of neuroscience, pain, metabolic diseases, oncology and inflammation. According to CEO Werner Lanthaler, Evotec’s focus is on curing the disease, rather than its symptoms.
In the past 14 years, the company has evolved with an approximate increase in costs to $3 from $1 billion. It has also divested non-core assets. Additional core competencies include innovation in academia, target ID/validation, hit identification, lead optimization, pre-clinical phases I-III, approval and market.
Evotec AG has two operating segments – EVT Execute and EVT Innovate. EVT Execute provides a cost-effective drug discovery research and development outsourcing platform. EVT Execute is an expert in providing high quality services with the help of Western strategic outsourcing partners. It is run by industrial logic and under the leadership of Evotec professionals.
EVT Innovate forms a bridge between academia and pharmacy. VT Innovate has a systematic, unbiased and comprehensive pipeline with two main initiatives: Target X and Cure X. It works in the fields of oncology, diabetes and complications of diabetes, neurology, anti-effectives and pain and inflammation. EVT Innovate works in five major fields to provide complete infrastructure and discovery solutions. Furthermore, EVT Innovate works in the direction of driving product candidates to expand pharmaceutical pipeline strategies without financial risk.
Drug Discovery Outsourcing
Thus far in 2014, Evotec has reported strong profitable growth with a potential increase of $26 million in total revenue. In 2014, revenue was $14.8 billion. With an expected growth pace of 10% per annum, it is expected to reach $21.3 billion in 2017.
Evotec Share Market
Source: Reuters.com
Estimates vs Earnings of Evotec AG
Source: Reuters.com
Market picture
Current market capitalization is 405.61 million euros, with 131.69 million shares outstanding. EVT Execute cash is used for investing in long-term upsides of EVT Innovate. The condensed H1 segments of 2014 shows a positive EBITDA adjustment of Euro 5.5 million in EVT Execute despite a low milestone contribution.
Evotec has several significant long-term discovery alliances with well-established industry players such as Bayer, Boehringer Ingelheim, the CHDI Foundation, Genentech, Janssen Pharmaceuticals, MedImmune/AstraZeneca and Ono Pharmaceuticals. Moreover, the company has many existing partnerships and product candidates available in both clinical and pre-clinical development.
Under these partnerships, Evotec has collaborated with Boehringer Ingelheim, MedImmune and Andromeda (Teva) in the field of diabetes. Furthermore, these partnerships extend with Janssen Pharmaceuticals in the field of depression along with Roche to assist in the area of Alzheimer’s disease.
Benefits of R&D outsourcing
The company outsources research and development in a new way. The outsourced R&D of Evotec offers other companies research based on speed, creativity, new technological advancements and cost effectiveness. This outsourcing idea has proved to be a success, increasing R&D spend, industry consolidation, biotech in-licensing or acquisition, R&D reorganization, capital efficient outsourcing and innovation alliances. Recently, Evotec had also joined a trio of research projects that focused on multiple sclerosis.
Growth and key milestones
Evotec focuses on quality-driven services and innovative alliances. Some major key innovations were executed in the year 2014. For EVT Execute, the company has planned an expansion of drug discovery alliances. These would be accompanied by new long-term deals with big and medium-sized pharma and biotech players along with at least one new integrated technology or disease alliance.
EVT Innovate will focus on expanding a network of top-class academic alliances in the year 2014. Concluding our call with the company, Lanthaler stated that Evotech anticipates a strong clinical pipeline development effort with significant partnerships throughout 2015. Alpha Deal Group currently views Evotec as an actionable high alpha opportunity.
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