Werner Lanthaler - CEO Colin Bond - CFO Cord Dohrmann - CSO Mario Polywka - COO

Welcome to Evotec. Welcome to our Year End Conference Call. It’s my pleasure to welcome you together with my management team who is sitting here together with me to guide you through this presentation Mr. Colin Bond, our CFO; Cord Dohrmann, our CSO; and Mario Polywka, our COO. Let me at this stage also thank my team for the year 2014 which we have delivered together and also for running into a strong 2015 together. You have the presentation for this webcast that you can find on the Internet. We will guide you through this presentation by naming the slides that we are basically referring to. With this conference call we want to look back to 2014 and very importantly we also want to look forward to share you some insights of how our business is evolving. When you go to your presentation, Page Number 4, you can see that especially the second half of 2014 was a very strong year for us with a strong performance in Evotec Execute and the clear acceleration of our biotech value generation business in Evotec Innovate. When it comes to some of the highlights and also some low lights let me just mention for example that in Evotec Execute we were able to sign new alliances and also extend very important existing alliances of our business. We achieved significant milestones especially in December within our Bayer alliance but also within Second Genome alliances but we were able to expand our capabilities and capacities in our Evotec Execute field. On Evotec Innovate, we see that the portfolio of optionalities is ahead of us. This comes from a portfolio which is already in critical stage and a portfolio which we call Cure X and Target X initiatives where we were able to increase the number of projects that we’re working on significantly. Just a few highlights here whereas we presented for example with the one alliance that we call TargetAD where we achieved significant early milestones to the new Alzheimer target search project. Also in closing new alliances Evotec Innovate was successful and here we recently announced an alliance in Second Genome. On a corporate level, we showed that we want to grow not only organically but also by aligning our strengths with other partners out there. But we are very happy that we acquired for example Euprotec in Manchester which is delivering according to plans and even is up in a new field that we have added to Evotec in the field of [indiscernible]. And we also recently signed an alliance with Sanofi and we’ll talk about that which is really catering to the strength of Evotec Execute and Evotec Innovate going forward. We would not work if there are only successes we also see that some has their prospects in our business a clear prospect in 2014 was that impairment that we had to make around DiaPep277 and we also saw some delays in project ongoing for example in the EVT070 which resulted in impairments and with this we also have to report that there were easy two projects real with this in the year 2014. On the other hand, we can say that 2014 showed us that there are alliances which sometimes work and sometimes don’t work like for example CureBeta which is again underlying the idea of Evotec by building a portfolio of multiple options that go forward. When you go Page Number 5 of your presentation you sum up the highest of 2014 in our financials and our CSO will then go in more detail into that. But I think it’s fair to say that it was a strong year especially in the second half. Overall, we grew revenues by more than 7% on our phase business, our Execute business is very strong not only when it comes to growth but also when it comes to bottom-line with an EBITDA margin of more than 24%. We do within Evotec Innovate what we plan to do we invest into the strategic tubes of Evotec with about €12 million to €12.4 million in the last year and overall we do this from the strongest liquidity position that the Company has ever had and with this we also go forward coming from the very strong position into an even stronger position in the year 2015. Our guidance for 2015 reflects accelerated growth and reflects an accelerated view of our strategy. When it comes to our core revenues which will grow by more than 20% this now includes also the first effects of our Sanofi transaction, our adjusted EBITDA as we stay positive as we have been in the last year. We will increase our R&D expenses from last year about €12 million to €15 million to €20 million and our liquidity grew very strong well in excess of €100 million. We are also committed to continue to invest in CapEx because we want to build the best infrastructure for our partners, customers and also for our own innovation work. On Page Number 7 of this presentation let me make one step back to bring you into our long-term strategy which basically is banking on the megatrend of excellent innovation and the need for higher R&D capital efficiency in the industry. We have seen this megatrend in the year 2009 and have built continuously Evotec into the stream of delivering here the right services and the right innovations to our customers. We made a very important step in 2014 by fully implementing our business segmentation which now leads to the fact that both segments have come to pretty good size. Evotec Execute is at a critical size that we are able to deliver to the top pharma companies and top biotech companies out there and Evotec Innovate is now for the first time in full swing to work on its full portfolio of long-term upside opportunities. So we feel confident with our actions in 2016, despite the fact that we have to see certain aspects by not bringing a sourced product on the market which could have been benefit to second. On this note, let me highlight that we will continue from 2015 onwards in accelerating the strategy and we are very happy that we can tell you that 2015 started very strong for us. At this point, I'd like to hand over to Mario who will guide you into our core business into the Sanofi transaction and the element that really constitutes the Sanofi transaction for Evotec Execute.

Thank you Werner, and good afternoon to you all as Werner said I will take you a little bit through our segments and the impact of the Sanofi lines on the segments what it brings to us in terms of accelerating our strategy and then also give you an update and some future key milestones on the Execute business. If we look at Slide 8 this is just the stuff we are seeing on where does Evotec operate our platform strength and focus is across the discovery path which of course is a significant length of the whole drug discovery and development timeline and phase of sanction compared to the overall timeline of developing a drug but moving at a fraction of the cost. Our product is primarily preclinical development candidates for our partners and collaborators or delivering specific work packages across various individual silos of discovery activities. The combination of this best in class platform experience expertise and a lean operating model drives this process in the most optimal way be it from a cost or time perspective. If we look at Slide 9 one company two segments, Evotec Execute and Evotec Innovate we manage our business through these two segments and you can look at this as effectively based on whether we work on a partner's intellectual property and project or projects of our own. Whole work is done from the same platform utilizing the expertise and resource most suited to the project in question and with Execute which is my business segment we focus on providing specific drug discovery services based on the client's target this is all standalone services or integrated drug discovery programs. On the commercial side these types of business either fee for service or HE based services or result based deals where the company in the segment can participate and the success of a project through milestones and royalties. Within Innovate which Cord will tell you more about later this aims to discover and partner novel therapies through its own internal R&D projects and intellectual properties such as Cure X and Target X initiatives with academic institutions and biotech partners, but their commercial deals is for significant upfront payments, the search payments for the associated collaboration and future milestones and royalties. Moving to Page 9 and some more detail behind the Sanofi alliance and this alliance comes at a time of really excellent performance of the Execute segment which has shown a record performance in the last year. We were pleased to announce last week the signing of the definitive agreement with Sanofi of a major strategic alliance which significantly accelerates both our segments Execute and Innovate. The deal is anticipated to be closed at the end of this month the collaboration results in a minimum guaranteed commitments from Sanofi of 250 million with at least 40 million upfront in cash. Moving to Slide 11 try and give you some idea of what the drivers of this deal is and it’s manifold and it’s truly strategic we believe for both our companies. To expand our capacities and capabilities at the time when our existing operations approach full saturation and so with this alliance we get a state of the art facility and 20,000 meter square in Toulouse and more than 200 scientific resorts. These capabilities and capacities will be integrated into Evotec’s global drug discovery offering at no dilution to our cash base. We will provide the Sanofi a broad range of this company services as of the course of the next five years and also as a part of this initiative we will assume management for Sanofi’s small molecule screening line range. As far as Evotec and Sanofi will combine their drug discovery like this and offer them to screening to third parties and I’ll talk about this a little later. Cord will update you on the collaboration over a number of innovative projects starting with the portfolio of oncology related programs part of which are already at a preclinical stage. And finally following our substantial success in fostering and commercializing innovative projects from academia we will with Sanofi further scale and integrate projects in France to continue to feed into our Cure X and Target X pipelines. Slide 12 shows you that Evotec is now truly a global drug discovery business so the significantly expanded global footprint of approaching 850 people. The alliance with Sanofi expands on a number of our existing capacities and capabilities as shown on Slide 13 which from other sides has now become significantly constrained screening, pharmacology, chemistry protein production just to name a few. As previously described we will take over the management of Sanofi’s small molecule screening correction. The operation includes it also means we now have the capacity to store and manage thirdly-party liability in euros for the first time. Slide 14 I tend to just explain in some short detail the groundbreaking hip discovery initiative. Evotec and Sanofi will combine into discovery libraries and make them available for screening to third parties. This creates one of the largest and most valuable sources of small molecule starting points in the industry potentially more than 1.5 million compounds and demonstrates I think Sanofi’s and Evotec’s intent for the industry to derive get much value from such an asset. Combined with the additional screening capacity from Sanofi we feel this provides the number one screening offering now available in the industry combining the highest quality live rate for the largest and most comprehensive screening platform. To finish off how we execute through in 2014 in Slide 15 let me will give you the highlights and walk through some of the key goals in 2015. As said earlier, the segment enjoyed an absolutely outstanding year with significant new integrated partnerships with companies like Shire, Convergence, Active Biotech many new biotechs in the East Coast of the U.S. where we continue to benefit from the significant pick up in terms of capital investment environments and up sides. The delivery of the highest class scientific results within existing programs has been validated such as our long-term collaboration with CHDI which was both expanded and extended a further three years. The world class initiative in endometriosis with Bayer achieved several significant milestones as programs progressed towards the clinic. And significantly as Werner said the performance of the infectious disease business Euprotec that we acquired in June of last year has met all the financial growth forecasts and fields as well as most importantly giving us the expertise and experience to operate effectively in this new disease area which has showing increasing sergeants in recent times. Financially as Colin will detail later the segment had a record year of €92 million in revenues of which €75 million was third-party business and at an excellent EBITDA margin of 24%. Going into 2015, the aim was to continue to leverage of the existing and new capabilities and capacities of our platform including the new platform in Toulouse put these into new long-term alliances with large and small partners alike as well as to maintain our absolutely outstanding track-record of delivering the highest quality of science within our existing partnerships. On that note, I pass over to Cord Dohrmann.

Thank you, Mario and good afternoon to everybody on the call. My first slide on Page 16 entitled focus on causes not symptoms is just a reminder of what we do and what we focus on in Evotec Innovate. Within Evotec Innovate we invest into preclinical stage R&D to build projects that we believe will be of value to some tremendously and will become the phases of future partnerships within Evotec where you would entertain subclass. Currently we investment within Evotec Innovate into three primary areas this and you see it are neuroscience, diabetes and diabetic complications as well as oncology, epigenetic and immunotherapy. In neuroscience we are using patient derived iPS cells for microbiome-mediated diseases and for screenings and thereby identifying novel targets and compounds the therapeutic value. In diabetes and complications we are also using an iPS cell approach to generate an unlimited supply of human beta cells which is on one hand potentially useful for screening and identifying novel targets and compounds in this area as well as for therapeutic x-rays. And finally in oncology we are pursuing a small molecule approach to cancer immunotherapy as well as pursuing number of select targets that modulates the activity of whole pathways rather than single targets. On next page you can see where we are currently expanding our efforts to build partner product portfolio which carries upside for Evotec. In total we have grown our pipeline of projects and product opportunities to over 70 by now and then by this project are currently at the clinical stage of development and the rest of them and preclinical development as well as discovery stages. In Evotec [indiscernible] the vast majority of these collaborations have actually been built over the last four to five years and essentially many of these contain lots of projects making a more strategic nature. And most importantly this pipeline was significantly expanded through our collaboration with Sanofi where we're adding a significant number of projects at the preclinical stage as well as in the discovery stage of oncology to this portfolio. This portfolio is shown in more detail on Page 18. Through the Sanofi transaction we are accelerating and broadening our oncology portfolio very significantly. In total we are adding 14 projects to our oncology portfolio four of them at the preclinical development stage and seven at lead stage and other at the earlier discovery stage. All of these projects are potentially first and best in class opportunities with very significant market potential. In return from an expertise stage in these projects Sanofi will continue to support these projects in terms of our research and development projects all the way through our upside in filing. On next page, Page 19 we can see that we continue to also build our academic network through collaboration. In 2014 in particular we had a number of individual projects started internally but we also expanded our academic network in particularly in Germany and here one example is the German Oncology Center located at the Shire here in Berlin as well as collaboration with a Solove Institute which is more broad in nature. We are looking very much forward to continue to build this academic bridge even expanded into France together with our colleagues at Sanofi we look forward for opportunities in France as well in future sale and we are looking forward in collaborating of institutes in future. Now altogether and finally on Page 20, Evotec Innovate have had a pretty good year. We achieved very good progress in our clinical stage development project we also expanded our Cure X and Target X strategy through partnerships we have achieved many milestones in our TargetAD collaboration for example and more recently build a new alliance with Second Genome on a product development opportunity that carry significant upsides for Evotec and also includes a significant upfront payment. Key goals for 2015 are to progress our clinical stage pipeline together with our partners and in particular progress the pipeline the oncology assets that are coming into Evotec through our Sanofi alliance. And we also expect additional partnerships on Cure X and Target X initiatives and we will continue to expand our academic network to our advantage. With this I'd like to thank you and hand over to Colin.

Good afternoon everyone. On Slide 22 we see the Evotec’s 2014 results fully in line with all elements of the guidance that was issued on the 24 of March, 2014. Firstly base revenues excluding milestones upfronts and licenses for 2014 increased by 7% compared to prior year and was therefore in line with guidance of high single-digit growth. Secondly, R&D expenses for the year totaled €12.4 million compared to guidance of between €10 million and €14 million. Thirdly, EBITDA before impairment and changes in contingent consideration of 7.7 million was in line with the guidance to be at a similar level to prior year and finally the liquidity at the end of 2014 adjusted for M&A related transactions of 93.1 million compared to the guidance to be above €90 million. Slide 23 shows the result of 2014 presented according to the Execute and Innovate segments. Consistent with our strategy the results of the Execute segment for 2014 showed strong revenues, good margins, a relatively low level of R&D investment, higher profitability with EBITDA of 22.1 million or 23.7% and strong positive cash flows. Meanwhile the results of the Innovate segment reflect the increased investments being made in the Cure X and Target X initiatives to drive the long-term upside for the business. Slide 24 presents the P&L of the group for 2014 compared to 2013. Group revenues for 2014 increased by 4% compared to the same period in the prior year of €89.5 million. Despite the increase in revenues the overall gross margin decreased from 36.3% in 2013 to 32.8% in 2014. This decrease was due to several factors, firstly a €2.4 million write-off as a receivable related to DiaPep277, secondly by an estimated 5% strengthening of the pound versus the euro and thirdly, due to a slightly lower level of milestones. Adjusting for these three effects, the base margin however actually increased slightly in 2014 compared to 2013. Impairments consists of the full range of the DiapPep277 of €8.7 million and a partial write-off of EVTO70 of €6.2 million being partially offset by the write-up or un-impairment of €6.4 million in anticipation of the collaboration with Second Genome for the treatment of microbiome-mediated diseases announced on the March 13, 2015. Slide 25, on Slide 25 the left hand box shows the three year trend in revenues, revenues from milestones, upfronts and likely to recognize in Evotec’s partnerships decreased slightly in 2014 to €16.1 million to €17.1 million in 2013. However as previously mentioned, Evotec’s base revenues increased by 7% in 2014 compared to prior year. The right hand box shows the three year trending gross profit as previously mentioned adjusting for the slightly lower level of milestones the write-off of a receivable related to DiaPep277 and the strengthening of the British pound the overall underlying gross margin slightly increased in 2014. This was the result of improved utilization, increased efficiency, higher productivity and judicious cost control. Slightly 26, on Slide 26, left hand box shows the three year trend in R&D expenditure. Consistent with the strategy of the company overall R&D expenses of 2014 increased by 28% to €12.4 million with significant investments being made in the Cure X and Target X initiatives. The right hand box shows the three year trend in SG&A expenses. SG&A expenditure for 2014 increased by 8% to €18 million this increase was due primarily to the acquisition of Bionamics and Euprotec onetime costs related to the transaction with Sanofi and the previously mentioned strengthening of the British pound versus the euro. On Slide 27, the left hand box shows the three year trend in the reported operating results including impairment. And also €6.4 million in 2014 was due to the impairment of DiaPep277 and DGO70 partially offset by the un-impairment as a result of the Second Genome collaboration. The right hand box shows the three year trend in EBITDA before changes in contingent consideration. As previously stated the adjusted operating profitability in 2014 of 7.7 million was in line with prior year due to rigorous cost control and the benefit derived from numerous optimization initiatives. Slide 28, on Slide 28 the left hand box shows that the asset base and liquidity at the end of 2014 were in line with prior year. The decrease in liquidity of €7.3 million is simply due to the timing issue a total of 8.4 million of milestones achieved late in Q4 2014 were only received in early 2015. The decrease in intangible assets and goodwill by 5 million -- 75 million is a result of the impairment and the un-impairment and due also to the Euprotec and Bionamics acquisitions. The right hand box shows an increased equity ratio at the end of 2014 of 71% up from 69% at the end of 2013. Slide 29, Slide 29 shows the results of Q4 2014 presented according to the Execute and Innovate segments. The Execute segment reported record revenues due to a combination of the Bayer milestone and the very strong base business which had a year-over-year growth of 7%. The Innovate segment continues to trend as previous three quarters with decreased investments being made in the Cure X and Target X initiatives. Slide 30, Slide 30presents the group P&L for Q4 2014 compared to Q4 2013, overall revenues increased strongly to €30.6 million up 19% on prior year and a record for Evotec. As a result the gross margin improved to 41.6%, investment in R&D was maintained at the level of the previous three quarters, SG&A expenditure was increased due to the one-time effect of transaction costs relating to the deal with Sanofi. The strong base sales and recorded milestones resulted in Q4 2014 EBITDA of 7.4 million being significantly improved on the prior year of the 4.5 million. With that I would like to hand back to Werner.

Thank you very much Colin. As you hear it was a very successful year nevertheless there were also unfortunate and disappointing events, especially related to DiaPep277. Having said that we decided to leave this behind us, leaving it behind us means that we have written it off when it comes to the milestones, as we were basically entitled to receive because there was [indiscernible] actually involved. And the second aspect is that we have decided to go forward and basically come to the two aspects that are important for us on this, aspect number one is that we want to have a declaration from Andromeda and Hyperion that no one neither Evotec nor any of the predecessors of Evotec has ever been involved in any further induction or any decision making that led to the stock of DiaPep277. This confirmation is now made by Hyperion is made public and serves every shareholder also into the future of Evotec. And the second aspect we wanted to get is to get at least a symbolic recognition of the reputation of the image that Evotec had through this event without being any exposure to the event and here we are very thankful to Hyperion as they are making and have made already 500,000 solid payment to Evotec of accepting that there was undeveloped reputation damage to Evotec in conjunction with DiaPep277 and with this we can leave this aspect of our Company's history behind us. And in terms of the outlook of 2015 as already mentioned we start into a strong year and we expect significant use during the year 2015 in both segments, Evotec Execute and Innovate. I don't want to repeat what Mario and Cord had already announced to you by adding mainly only one aspect within Evotec Innovate that we also expect the Phase 2b data from our ongoing Roche alliance in Alzheimer's disease before the summer, which is a very important clinical milestone for us. You will see in both segments strong performance throughout the year 2015 and as you have already seen we have started the Sanofi partnership. On that note, let me finalize this call before we handover to questions by reiterating our guidance to you for 2015 where you will see strong top-line growth where you will see continued positive EBITDA, where you will see a liquidity which will achieve record highs for Evotec in the year 2015 and here where you will also an accelerated investment into our R&D capacities and capabilities and especially also the idea of reaching academic project into pharma project which is the basis of our Evotec Innovate strategy. By announcing to you on Page 35, our reporting day for 2015 where we hope that you follow the Company throughout the year and into 2016, I would like to conclude here and open up the floor to your questions. Thank you so much for dialing to this call and thank you so much for following Evotec.

Thank you. We will now begin question-and-answer session. The first question is from Paul Kahan. Please go ahead.

Actually one, just related to the guidance, what does more than 20% mean and when looking at the collaboration with Sanofi and the revenues generated ex milestones upfronts and licenses. 20% would mean roughly 15% million which is not very aggressive, so when looking at the deal of Sanofi. Is than an cautious Austrian outlook more than 20 and my understanding could be closer to 40 if I am not mistaken or maybe I have understood something wrong, could you please clarify that?

So that's Paul actually Paul at your new address. I suspect because you have changed the bank that you're working for if I am correct?

That's correct it’s [indiscernible] to make a bit of excitement yes.

And this is not a conservative option and then as you see this is conservative with UK German management team analysis where Colin will guide you through the rational but I would take lead that overall this is a caution that we want to put on this because one thing we all want to achieve together over achieve what we are guiding here that means to under achieve.

Yes Paul it’s Colin here, so the transaction is quite complex there is a number of agreements and there are fixed and variable components in the agreement. And for the fixed components we can recognize those as revenue for the variable components we recognize that as other operating income and we have a very good idea about exactly what contracts for into each of those two. But as Werner said we also wanted to be a little bit conservative at this stage in terms of our recognition in order that we could over achieve as the year goes on.

Okay, then maybe follow on, how much of that let’s talk about 20%, so 15 million. How much of that would be capital already with Sanofi deal, what about the remaining business I guess there is also growth potential to that part of the business?

Yes I think on the basis and as you know we are expecting to achieve 10% plus growth clearly we have a positive impact from the dollar with 50% of our revenues being dollar denominated but 10% in euro reported numbers and then the rest coming from the Sanofi transaction.

The next question is from [indiscernible]. Please go ahead.

I just want to poke through the different potential ways to look at this. If I understand it right the upfront of 40 million you are allocating across five years so that would put roughly €6 million in the 2015 top-line and gets really straight forward and moving on to the, what I’ll call Sanofi Execute piece just if I have my math right here. We’re looking at roughly 60 employees in that group, if I price them at 125k from up to just short of 8 million in 2015 I think that’s what’s going into the base business growth 20% figure but not the next two which is the Sanofi Innovate this is my terms and how have your focused group roughly 65 guys priced a bit higher and getting earned €8.5 million and the last piece 80 to 85 employees at a mixed rate between those two prior numbers roughly €9 million but those costs are maybe more on the Innovate side and maybe we are not seeing them as base business Execute non-milestone base revenue. So I guess we’re king of struggling with the guaranteed money I think plus 20% when it could be much more. So if you could just clarify again for us you’re looking more so at Execute guys I think, is that right?

Yes there was a lot in your question, but that’s just breaking down. So the first element the cash at the closing which is about in excess of 40 million, part of that is some advanced payment for nine months of cost coverage and I think you’re aware that we’re getting a total of five years of cost coverage under the deal. And the other 20 million is for liabilities that we will inherit at the closing and that’s really how the 40 million breaks down just broadly. And then Paul asked the question about revenue recognition and I explained that the revenue is recognized in the revenue line and it is fixed in other operating income as its variable where the costs term are then recognized it also complicated if we’re doing research work then that will be in the R&D line and recorded as part of the R&D expenditure which is why we’ve raised the guidance to between 15 million and 20 million in 2015. And then a portion of the cost for the operating cost for sales for the work that we do under the NSA we kind of…

Overall I think the idea is to work very closely with the auditors a few quarters not only have aligned with the auditors now upfront but also by law with the auditors and then we create revenue recognition and the exact cost line certainly become much clearer one thing should be clear to everyone that there is hedge inflow which is increasing our tax provisions and with that’s being basically a stronger position of the company ever than we ever have before.

In terms of the 20 million in liability how would you expect to account for that? Is that something that’s across the year maybe a bit more in Q2 versus the rest of year or all that right upfront in Q2 how do we look for those?

Yes most of these are long-term liabilities that are on the balance sheet of Evotec France when we acquire it on the 31st of March and would stay on the balance sheet long-term they are statutory liabilities and hedged for the employees and the assets that we're acquiring.

And one last one before I jump back in queue on the lease expense maybe I missed it can you give us some help as to how much that would be?

On which expense?

Lease expense how much if it's flat growing dropping et cetera?

Well it is absolutely covered under the contract for a period six years and there is a formula in there that's related to commercial property rates in France but our expectation is that the increase will be very minimal in the first six years.

The increase in spending or the increase in that lease payment?

On that lease payment we get fully reimbursed for it in and then in and out first as the rate increase we will get covered for it.

We're going to try to put that in the P&L I'm just wondering what or how much we should put in the expense lines for that lease?

As we said it's a footprint of 20,000 square meters and I think you need to make an assumption on what the cost per square meter is.

The next question is from Igor Kim. Please go ahead.

The first one, could you provide a bit more color on your EBITDA guidance you said it's going to be positive, but I don’t know could you be a bit more specifically in the prior year should it be on the prior year level or better than in the prior year? And the second question is how many INDs do you expect from the oncology assets within the Sanofi alliance there so far? Thank you.

Igor, it's Colin here, so on the EBITDA for the base business exclude the prior to the Sanofi transaction we saw that the EBITDA would be in line with 2014, so and with the Sanofi transaction obviously Sanofi effectively becomes the customer we have immediately but for the remainder of the employees at the site we have to start to make them productive and get them working on third-party work and naturally taking on a new location having to integrate them into Evotec there will be a period let's say in the first nine months before we really then past the third party revenue so we've been conservative in 2015 to say okay we will be neutral in terms of EBITDA because we're getting cost coverage with the Sanofi transaction and then add that to a base business that's in line with 2014 and then put a positive EBITDA of the guidance for 2015 with including Sanofi.

And of course don’t forget that we also are indicating that our R&D expense will decrease significantly so [indiscernible] about 12 million and what we are indicating right now is on our Evotec Innovate strategy that we will go from about 12 million to 15 million to 20 million which of course is a direct impact on EBITDA number. That's your first part of the question, second part of your question if I may is so we take over five preclinical assets that are currently in late discovery early preclinical stage and could go to IND situations in the next 24 months. I think it's a bit too early to give exact guidelines now and say that's how many of these will make it to IND it's a fantastic opportunity because Sanofi and Evotec together have decided that we will put all efforts to make them as fast as possible IND and that Sanofi has committed to financing the five preclinical projects to whatever it takes to bring that to clinical situations if this data holds of course and if this justifies putting in these -- efforts into the clinic as fast as possible but that's the opportunity here with the first five assets and then as Cord has indicated to you there are another nine discovery assets behind that which we takeover right now and which are fully in our core competent of Evotec to accelerate that.

The next question is from Gunnar Romer from Deutsche Bank. Please go ahead.

The first one would be with regard to the anticipated step up in R&D I was wondering whether you can give us a split how much of that is related to the Sanofi deal and how much of that is related to the remainder of your pipeline project? And then second question again on the Sanofi deal and the minimum commitment I think you've already indicated that this is obviously split into Execute and Innovate parts, I was wondering whether you can give us a sense of what is effectively related to Execute over the five year period? And then lastly on the potential income from success based payments i.e. upfront milestones licenses if you can just elaborate a little bit of what is the potential in the current year, and what are the key milestones we should be looking for? Thank you.

Thank you, Gunnar. So on the R&D step up the idea really is to invest into the most promising projects. And of course we have a larger portfolio with the now added Sanofi project that we can focus on but here Cord and his team are going through a constant prioritization including the money behind the most promising projects here. But what you probably should assume here that over the course of the year the Sanofi projects will be part of the total portfolio and it is assumed that the total portfolio there will go faster and we’ll be strategically more focused in these investments when it comes to basically putting more focus behind it. One thing is clear that we want to with this transaction have a step function in our oncology investment so the thing in oncology which come through Sanofi and that are already in the company fit so nicely together that I would say the majority of the step up is an oncology with the step up in finances that are put behind R&D. On the Execute front I’d like to head over to Mario and Colin will then round up your question.

I think first of all which make the statement that in terms of performing against collaborations so this becomes part of the global footprint of Evotec and so we’re not looking at it necessarily as to lose only performing against certain Execute and the Innovate programs. As part of the deal, there is a global research agreement in place with Sanofi for which Evotec can license certain programs to Sanofi and one of the slight uncertainties on revenue guidance of course is that these projects are in due diligence at the moment we’re not quite sure what degree the projects will come to be to revenues during the coming year. We have an NSA with Sanofi and I think it’s fair to say that probably one-third of the five will be dedicated to performing against this NSA across a number of services. And of course Cord and him team will be doing number of Innovate R&D projects in Toulouse adding those and having done and getting them in Hamburg and Munich and we’ll also do a number of Innovate collaborations which are being partnered into Toulouse over the next six to nine months again as we does in getting in Hamburg.

And then the last question about potential milestones and upfronts I think the potential and possible milestones in 2015 are at similar level to 2014 but making any specific commitment here is we will often do that because these are very digital events and as we saw in 2014 the milestones really a significant number came in December late in the year. The potential ones are in line similar to prior year.

And this of course is not taking into account the potential of our 302 collaboration with Roche which would come on top of what Colin is just indicating because he do know that we still have a potential of milestones of $820 million if this product goes to the market and if market is and we have double-digit royalty rate also on top of that, so this is digitally gained we have basically we just put it on neutral at this stage and don’t included anywhere of course.

Maybe two follow up questions if I may firstly on the 302 as you have just mentioned upcoming data Phase IIb and would this immediately be a milestone triggering event for you in the case of this positive data and have you ever talked about the potential magnitude in case of positive data? The second follow up again let me try it again on the Sanofi deal. Not sure because I think there should as I understand that that would in the 250 million that should be fixed and variable parts. And can you talk about at least the fixed part of over the next five years how they phase in and what’s the overall absolute magnitude are we talking more than 50% of the 250 million are we talking significantly more than 50% any kind of directional comments here would be much appreciated? Thank you.

On to your two these are Phase IIb translate into the Phase III and this continuous success then of course this would immediately trigger a milestone leading from Phase III start which could happen by the end of 2015 beginning of 2016 again here data will guide us and data will define how fast this is. And here making too many assumptions on data is probably a good [indiscernible] correct. But again thing that will come soon is the milestone that we would achieve by transferring to Phase 3 is a double-digit number, it's a high double-digit number. And the other aspect that you should be aware of here is that at this stage in the world of Alzheimer's are not so many more Phase 2b out there, so it's a real busy day for Roche and for us and where they represent us. And on getting more on Sanofi again back again to Cord.

Yes so of course revenue recognition is complex and as I said fixed components we will recognize as revenue of variable components as other income. The fixed components the majority of the employees will be in the fixed category that will be a significant number in a variable category. Materials for example clearly a variable cost whereas it is fixed and when you put all of this together just to give you an indication, I will say in excess the 50% will be fixed.

And maybe as a final question would you be able to update us on the details of the Sanofi deal and how you recognize it over the course of the year as your discussions with the auditors’ progress?

I think as I said already before we have a quartile extensive discussion with the auditors but we really want to have assigned of [indiscernible] of how the transaction evolves, how it ultimately is integrated don’t forget we will start working under our own leadership on April number one and of course we will then during the year give updated insight and updated guidance on how this transaction is ultimately reflected in accordance with best practice and [indiscernible].

The next question is from Victoria English. Please go ahead.

This is a question for Werner. It must not mistaken Sanofi was on a collision course with the French government over the factory in, and I am wondering whether if we -- whether Evotec could be characterized in this situation and if that is correct view, whether you're being adequately compensated for a situation which was quite difficult for them? The second question concerns the EVT302, if the Phase 2b study is successful, this likely to more investments on your part into neuroscience?

First of all we don't see it in any way as a white knife or green knife or black knife not at all, we really see the opportunity to work together with Sanofi and the Discovery capabilities and capacities to do something which is logistic to our Execute business for example building a compound management center in Europe is a fantastic opportunity which is arising through that and have nothing to do with any worker's complex effecting ongoing on the side over the last two or three years. And the second thing we also see completely synergistic with our Evotec Innovate business and one thing you should also appreciate Evotec had no more growth capacity on our side in adding in on our site in Hamburg on our site in the United States, so we're looking for growth capacity and having access to a pharma brand top equipped discovery asset and the unique opportunity and of course you can now say you have to be and this is supposed to -- no it's definitely not us it is something where more dilutive cost through our shareholder and to our overall burden to the P&L we were basically able to create a step function of our business because building capacity takes time and also getting exit through highly qualified people would have taken significant time. So it's really a short-cut for us, we feel anybody compensated, absolutely because otherwise we would not have made a deal which I think has to serve both parties, Sanofi has to be happy and we have to be happy, don't forget Sanofi will be a strategic customer also for us. So it's really something where we do go hand in hand with them in certain aspects of the business going forward. On the 302 questions, I think I want to highlight that CLS and neuro-degeneration is already one of the core investment fields of Evotec and this will not change independently of the outcomes of the 302 trials. There is such a massive need in CLS and neuro-degeneration that we see this as a strategic long-term opportunity independent of the outcome of one trail.

And the next one is follow up question from [indiscernible].

Just as we get towards the end here, just wanted to take an opportunity here any potential strategic changes as a result of the Sanofi transaction and kind of dovetailing on that it looks like your R&D expenses maybe one immediate impact from this because of the increase EBITDA is positive we don’t have a quantified and seeing that room to just regulate4 in the R&D but in terms of other strategic changes from the Sanofi deal can you speak to how Evotec may look well 24 months down the road?

I think the immediate step up as you will see is that we are very happy that it was [indiscernible] to create a step function in oncology investments and in tapping into also oncology fields for example accelerating our efforts in immunotherapy in oncology or focusing on the micro environment in oncology or focusing on epigenetic in oncology that’s the clear immediate set of functions which put up strategically on this map where it would be fair to say that 24 months ago Evotec wasn’t of the oncology top qualified [indiscernible] in the discovery world. On the other hand when you look 24 months forward I think that what we are doing in leveraging our core capabilities and capacities in the field of discovery and accelerating clear partner programs going forward is the right thing for us and I think it also care to say that we feel doing more of the same is for us effective the right strategy because the portfolio effect of what we are doing will become stronger and stronger and this will allow us to ultimately hit a value inflection point a balance sheet value inflection point in one of the programs that we are working on sooner or later and that’s why we are so confident on our overall strategy and do not change going forward.

Just a quick follow up to that one would be any change in your appetite for acquisitions, the size, the speed, the number of those, clearly have some integration attention in place this year. Does that change your outlook in any way your acquisitions?

I think it’s fair to say that we have to mindful of the fact that getting that to lose the transactional right has to be a key priority of this company and it would signal the wrong things if we wouldn’t take this serious to our customer, to our new colleagues and also to our existing customers because the capacities and capabilities that we are integrating are key for all constituents of Evotec. So, there is a clear focus on this and I think it will be a key strength for Evotec if we do this right. Having said that, it’s our obligation, opportunity and also the spirit of how this management team comes together is an opportunity that creates value for our shareholders we will always look for it.

Your Execute guys are on sale right now in terms of the -- from U.S. customer positioning. Have you seen any increase in the numbers of deals increased attention on conversations, is this impact in your budgeting for 2015, how do you see this currency exchange rate changes?

So, maybe exchange rate and Execute’s Mario your comments.

That will obviously is now very favorable position of the U.S. Company to do business with the Evotec which is primarily European based on the euro. So we do see significantly more interest and as I said before we were experiencing an increase interest in our services with all the BC funding that’s happening in the U.S. very buoyant financial market and the exchange rate only helps us.

But of course never forget peoples work with us because of the quality and the scientific data that we deliver not because of exchange rates.

The next question is from Mick Cooper. Please go ahead.

Two questions, one regarding the growth, how many years growth has you got kind of following the acquisition with Sanofi and the second is with that as we look at margins over the next year or two? And then second question with can you give us any guidance or new update on EVT100 series please?

First question I’ll hand over to Colin I’ll comment on the 100 series.

Mick, as Werner said before the really attractive part of doing the Sanofi deal is it could sense the media access to capacity assets and people and at the end of 2014 we will fundamentally fold in all of that facilities. And having to choose gives us we believe between three and four years of growth and capacity and gets us through to the end of 2017-2018 before we would have to significantly expand and increase our headcount, but of course there are two sides to this physical capacity beyond 2017-2018 because it has the ability to accommodate we believe up to 400 scientists there and we've just inherited 208 at the closing of the transaction, so we think it can stay now organic growth for the next six to seven years if we then recruit beyond the current footprint. And in terms of margin of course the really attractive thing about the deal is that there is cost coverage, so as we scientist into these we can get working on third-party work that has a very positive impact on our overall margin.

Colin here, second part of the question I think we EVT 100 series that's one where I think the lives [indiscernible] and I have given up counting how many lives [indiscernible] has now but I would clearly say that some of the lives has been used up already with EVT101, 103 we are now focusing on more compound in this series we are very happy to report that that Johnson is an excellent partner who is absolutely strategic in the field of NMDA receptor and they are reinforcing their focus on the NMDA series and they are progressing this compound forward it's of course far away from now going again into the clinic but I think we were able to report a milestone on this in 2014 which shows you the renewed interest of undertaking this project where you also probably remember that by the end of 2012 we have to report basically a full stop and full write-off of the project which is now no longer a case almost [indiscernible] to say.

Since you announced [indiscernible] should we consider to kick in now and that is [indiscernible] two years away from the clinic potentially or kind of or what?

It's difficult to say and because the data [indiscernible] so there will be data especially from preclinical [indiscernible] models that will give us a quite good hint on which compound should be progressed into clinic throughout this year and then we can give you better guidance on this one. I think it would be wrong to assume a clinical start in a treatment resistance depression indication in 2015 [indiscernible].

The next question is from Thomas Schießle. Please go ahead. Thomas Schießle: A question on the Innovate space, Werner could you please update us on EVT201 for the Chinese projects that's supposed to be a start of clinical trials when will they start to materialize and the second question is on your acquisition you protect -- you communicated that it still is quite nice [indiscernible] effect, but how long will it take to the top-line and that we will see some hopefully exciting news from the infectious disease space and the second part of the question if I may is some [indiscernible] for Colin, Colin please could you update us on the KPI business and new business in 2015? Thank you.

I think on 201 the best comment to make is that our prime activity pharma is focusing on the project is bringing this forward it has been very close in contact with the Chinese authorities to progress this as it is cleared from the Chinese authority to initiate clinical trials and we expect that in 2015. On Euprotec I answer and look at Mario at this stage but one thing you should not underestimate of course is what we took over with Euprotec is a company that is highly capable and highly skilled but it was only less than 20 people there so it is in fact visible top-line impact of that group we just have to show you that we that they are part of the overall top-line now but as Mario stated before this is actually delivering better than we ever thought at the point of acquisition which would also be visible by the payout of milestones that we have built into the model once we will achieve that goal there. And the third aspect comes to Colin on the KPI.

Yes so Thomas we as I said before we expect 10% growth from the core business in euro terms, in 2014 we have 85% repeat business in the year but we also excitingly have many new customers and of course in 2015 we’ve now closed Q1 with Sanofi as I said becoming even our number one and number two customer. I don’t know if that answers your question about KPIs.

There are no further questions, I hand back to Werner Lanthaler.

Thank you so much. Thank you so much for following us. We understand that the transaction announced with Sanofi will take a bit of time to get every idea and every strategic aspect of the company updated. Having said that about every individual element of this transaction, we are very happy and we see that it will create long-term value for our shareholders. And as a last comment, let me thank you again my team here, let me thank the whole company who is performing extremely well and that we thank you because you are the multipliers of our investment into financial communities. Thank you.