Werner Lanthaler - Chief Executive Officer Mario Polywka - Chief Operating Officer Cord Dohrmann - Chief Scientific Officer Enno Spillner - Chief Financial Officer

Jean-Paul Mannie - Kempen & Co. Igor Kim - Oddo Seydler Bank Falko Friedrichs - Deutsche Bank Samir Devani - Rx Securities Victoria English - Evernow Publishing Limited Volker Braun - Bankhaus Lampe

Dear ladies and gentlemen, welcome to the Evotec AG Conference for the Q1 Report 2017. At our customer’s request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be opportunity to ask questions. [Operator Instructions] May I now hand you over to Dr Lanthaler who will lead you through this conference. Please go ahead, sir.

Welcome to Evotec, welcome to our conference call for the quarter result Q1 2017. I’m here together with my team Mario Polywka, Enno Spillner and Cord Dohrmann. We are very happy as a team to say welcome and say at the same time welcome to a strong first quarter 2017. When you go to Page #4 of the presentation that we have uploaded on the web, we want to show you a few highlights of Q1 2017. You will see that the operation is performing strongly basically, in all segments, Evotec Execute and Evotec Innovate. And we’re also performing quite strongly in all the corporate activities that we have started in the last two years. With this, it’s fair to say that we’re still on our theme that we have claimed last time that we’re shifting gears up and we’re on this theme also into the beginning of 2017 fully up to speed by shifting gears up in what we’re doing. If you go to Page #5 of this presentation, you can see what the shifting gears up means reflected in numbers. You can see a strong, yes, you can see a very strong financial performance in Q1. If you look at our Group revenues, they’re up by 34% for the first time about €50 million in a quarter, you see a strong adjusted EBITDA and you see what is key for us that we continued to invest into first-in-class discovery asset in our R&D. Doing this on the basis of a strong liquidity base makes the company strong and going forward even stronger. With this, we can confidently confirm our guidance for 2017 where we’re going to grow by more than 16% on the top line, where we will grow our EBITDA significantly, and where we will continue to invest in certain cost research. On Page #6 of this presentation, you see that clarity is key to everything. Our strategy is clear and with this we have the long-term fully clear strategy to the inside, but also to our customers in place. And clarity allows us to go faster, because we know where we are going and that’s the reflection on Page #6 that we want to share with you that we are doing more of the same from 2017 onwards in building first-in-class discovery alliances with our partners. Page #7 illustrates to you that we have become a global player with a global expansion strategy. And this is best reflected if you look at our currently ongoing recruitments. We are, at this stage, hiring new top talent from academic institutions and other companies into Evotec to grow on all sites where we are currently at. On that note, let me hand over to the key two segments that are driving Evotec, first to Evotec Execute represented by Mario; and Mario will then hand over to Cord on the Evotec Innovate.

Thank you Werner and good afternoon to everyone. We’re now on the Slide #9. The Execute segment continues to progress very strongly from its impressive end to 2016. We continue to deliver excellent science and meet project objectives with and for our partners across our significant number of alliances and collaborations. Additionally, we’re pleased that we are supporting our growth through new integrated collaborations such as they signed in this quarter with Dermira and Asahi Kasei. These two new projects reflect the ongoing trend of partners accessing our best-in-class drug discovery platform across all activities to drive their projects towards the clinic. We’re also very pleased and we’ll report a bit later on the strong progress of Cyprotex that we acquired in December of 2016. Moving to Page #10 and the financials. You can see that the scientific and project progress is reflected in very strong revenue and EBITDA growth in the quarter. As Enno will speak to later, revenues grew by 24% to €48 million from €38.6 million in the equivalent quarter of 2016. This was with the concomitants of strong positive contribution from Cyprotex, EBITDA grew some 26% to €12.2 million. Turning across to Page #11 and looking at our customer mix and geography mix. By segment, our revenue and customer profile remains quite similar to that we experienced in the last few years. The top 10 relationships account for approximately two-thirds of our revenue, this is slightly down from 2016, which is a positive implication reflecting a broader customers spread. Strategic relationships with pharma and biotech and a consistent penetration into the foundations continued to serve as the fuel for our business on a global basis. Moving to Slide #12, we would take this opportunity to update you on the progress of Cyprotex the ADME-Tox company we acquired in late December 2016. The company is now well integrated into Evotec and exceeding our expectations in its performance. Cyprotex contributed some €6 million in revenues for the quarter and with a positive contributing EBITDA. The main operation in the UK successfully relocated to state-of-the-art laboratories in Alderley Park and we are close to selling the former facility in Macclesfield. Despite the significant disruption that a move brings, the team was able to close a strategic profiling contract with a major Swiss headquartered pharmaceutical company. We will strive to continue to develop strategic relationships such as these over the more classical tactical work in this area to drive more sustainable and forecastable growth. Finally, to wrap up on Slide #13, we set ourselves of course a number of significant objectives for the year. It has been a very strong start to the year as you will see during the course of this presentation. With Evotec segment weshowed good project progress, good revenue, good EBITDA growth. We were able to have signed a long-term alliance with the large and some mid-sized pharmas. We were able to sign two new performance based integrated disease alliances in the quarter. And very nice milestones were achieved in the quarter as were our expectations. We expect significant achievements in this area in the next quarter or two, especially to our endometriosis collaboration with Bayer. So on that positive note, I’ll now pass on to Cord for his presentation on the Innovate segment.

Thank you Mario and good afternoon to everybody on the call. It’s my great pleasure to give you an update on Evotec Innovate. Evotec Innovate continues to be on-track and we had a very good start into 2017. We continue to focus our R&D activities in the areas that are listed on Page #15. And we can report good progress on most of these projects that we’re currently running on their own R&D umbrella here. Most of our Innovate alliances also make good progress and here progress can be exemplified and measured by milestone achievements, which mark significant achievements in key discovery milestones. On the next page you see you on the financial performance of Evotec Innovate. Evotec Innovate continues to grow its revenues and revenues have increased by close to 100% in Q1, 2017 over the last year. We have significantly improved the EBITDA and slightly ramped up our R&D expenses and continue to invest in highly promising early-stage projects. On the next page you can see that we also continue to build on a pipeline of partner product opportunities, which holds significant upside for Evotec in terms of milestone and royalty payments. Today I just want to briefly mention two discovery alliances where we have made significant or have achieved significant milestones achievements. One of them is shown on Page #18. This is our chronic kidney disease alliance with Bayer. This alliance only started in Q4 2016 and has since then already achieved two discovery stage milestones. So, we’re extremely happy with the progress here and excited about moving this forward and potentially be expanding this alliance. The second alliance that I would like to mention is on Page #19. It is our diabetes alliance with Sanofi in the iPS cell field. This particular alliance started in Q3 2015 with two major goals. One goal is to develop a cell-based therapy for the treatment of Type I and Type II diabetes based on iPS-derived human beta cells. And the second objective is to use human beta cells for drug screening. More recently we announced that within this alliance we have achieved a preclinical proof-of-concept insulin that allows us now to also enter the drug screening bit of the collaboration and this alliance we achieved a €3 million milestone payment. The toping in the field is of course trying to address the fundamental causes of diabetes. In diabetes it is really the loss of beta cell mass and function that ultimately triggers the development of Type I, but also Type II diabetes. Accessing human beta cells here has been a key bottleneck for a potential cell therapy, but also for a systematic approach to drug screening in this area. We have now cracked this bottleneck very highly excited to move this project forward on both fronts together into Sanofi. On the next page, I just want to briefly mention that we also continue to build our academic BRIDGE strategy. We have built at first a very strategic BRIDGE with Oxford University at the end of last year and we are very optimistic that we will build additional BRIDGEs in our similar setting with other institutions in 2017. On Page #22, I want to mention that we also expect to continue to make equity investment into promising early-stage biotech companies that use Evotec’s platform to drive their projects. So far we have made certain investments here overall and this will continue to be a cornerstone of bringing projects potentially in partnership with these biotechs forward to proof-of-concept in human. Finally on Page #13, we have a very strong outlook for 2017. We already achieved a few of our goals; but expect to take the final boxes as well going on into 2017. With this, I’d like to thank you for your attention. I’ll hand it over to Enno.

Yes, thank you Cord and a warm welcome also from my sides to all you being on the call here today. And let me start with the Page #25 about the general overview comparing Q1, 2017 and Q1 of 2016. So, all-in-all as Werner already indicated, we had a great numbers and experienced a record quarter when comparing to Evotec’s financial history and this also against the fact that’s normally by numbers, the Q1 is the weakest quarter or the weaker quarter in our year. This is not the case for 2017 Q1. So the numbers are in line with budget and also in line with our expectations. And once again we do recognize a broad growth within the group. So both segments performed and developed positively as you just could see. Cyprotex delivered according to our expectations and shows very positive contribution and the different sides are growing as well. So in total, it’s not a single branch within Evotec which is carrying all the growth, but it’s rather spread across the organization and across the group. Coming to the numbers, the total group revenue and this shows a significant step up by 34% to €50.2 million due to increase in base revenues and milestones and the already mentioned €6 million contribution from Cyprotex. Besides growth and base revenue and improved capacity utilization, the main reasons for the increased gross margin by 4.1 percentage points is an increased milestone volume obviously. These milestones deliver an almost gross for net margin due to no immediate cost being associated and therefore have a significant impact. An additional positive impact we do see from our foreign exchange triggering about 1.7% of our gross margin that you can see on the slide. R&D expenses are slightly up by 6%, again showing our strong commitments into high-level innovation. And also the SG&A showed an increase, however this is a little bit higher showing a plus of 36% due for several reasons. One is the SG&A from Cyprotex now being added. And then we have the Cyprotex integration going on in Q1 also showing some one-off effects from integration as well as from the move to Alderley Park. And last but not least, we have to strengthen the headcount in different parts of SG&A like business development, HR, finance and IT to simply cover the growth that the company experienced in the past quarters. Other operating income went up, thanks to increased R&D tax credits, which we received particularly in France, at the same time R&D tax credits in the UK remain at stable levels. Consequently, the adjusted EBITDA went up 83% to €13.2 million catching the positive effects which I just described from revenues in combination with an increased margin, including Cyprotex and tax credits. Also on the net income level, which was slightly negative in Q1, 2016, we now see a positive result of €6.9 million. Brief comments, with regard to the cash, which is not stated here on this slide, we are currently showing €185 million in cash after €126 million at the end of 2016. Looking briefly at the adjusted EBITDA in the different segments on Page #26; both as I said do deliver very well, and the Execute revenues are up 24% from €38.6 million going up to €47.9 million, including a strong €10.3 million intersegment revenues. This is a strong performance of our base business plus Cyprotex revenues, which we recognized not only on the revenue line, but also on the EBITDA and gross margin line. At Innovate revenues, we see a significant increase by 96% from €6.4 million going up to €12.6 million, almost doubling. This is besides growth in the base revenue business, for example, due to the new Celgene collaboration, which is making progress. Also thanks to milestones achievement, milestone achievements from our Bayer and Sanofi collaboration, contributing €4.5 million on total milestones. The gross margin, we see a solid gross margin here in the Execute segment, which doesn’t include any milestones in this quarter. And furthermore, we recognize an impressive gross margin within Innovate, obviously thanks to the just mentioned milestone achievements. And here we have to keep in mind that they contributed significant part to the margin for future quarters. Other operating income, I mentioned already the tax credits which are on both sides Innovate and Execute, so that’s spread out across both segments. Looking quickly at the next slides, at gross margins and group revenues, and here no matter on which level we look, whether it’s the group revenue with or without milestones or whether it’s the gross margin with or without milestones, and you can recognize that we have a strong trend now consistent for several years continuing to grow and we hope we can maintain this direction. So the base revenue went up to €44 million, which is this 30% increase compared to 2016’s €34 million, and also the increased – milestone volume was highly visible here showing a 34% step-up in growing our milestones. In addition to the effects just described in context of the revenues, we have once again improved capitalization of our capacity capitalization and utilization. And internally, we have internal programs ongoing on the lean initiative, which also contributes to making sure that our company improves its efficiency on all levels. With that said, I would like to hand over to Werner. Thank you.

Thank you very much. On the corporate level we feel that bringing in Novo A/S also helps us shifting gears to the upside. Why do we say that? Because you see a much more balanced shareholder base than we had years ago. Also by mentioning that, for example, AGI has increased their shareholding in Evotec at this stage. On a corporate level, we are also very happy that Michael Shalmi from Novo A/S has accepted the invitations to be proposed to our AGM to be elected for our supervisory board to serve there in the future. Let me close on Page #29 by repeating that we see a strong start into 2017 where that the year has just started and that we are fully committed to make it an even stronger year than it has started, we added that we have to deliver on our guidance and we will. Thank you so much. We are happy to take all questions.

Thank you. Now we will begin our question-and-answer session. [Operator Instructions] The first question we’ve received is from Jean-Paul Mannie, Kempen & Co. Your line is now open. Jean-Paul Mannie: Thanks very much. Good afternoon gentleman. Thanks for taking my question and maybe two and one on Cyprotex. Mario, you mentioned that things are going well. I look that the €6 million is pretty strong, outperformed already in Q1. Could you give us a bit more color how this compares to the several situation of Cyprotex before and how does it now fits into the longer term within Evotec? And maybe could you spend a few words on how the Celgene collaboration on pluripotent stem cell is going? As I asked last time, is there anything we could expect for the coming quarter on that technology? Thanks.

Thank you. First question will be answered by Mario. Second question will be answered by Cord.

Thanks for the question. So with Cyprotex, as we gave in our initial guidance when we acquired them, we anticipate a contribution to the top line of around €20 million in the first quarter. Result of €6 million with a fairly strong EBITDA exceeds our expectations for that quarter and that’s especially against the backdrop of the integration and moving the facilities of around 100 people from Macclesfield to Alderley Park. So we’re very pleased with the way it’s going. We still feel that there is a lot of headroom in the markets for Cyprotex, especially by bringing in more strategic long-term relationships and perhaps minimizing this short-term small tactical work, which has been the past of Cyprotex. This quarter represents a record quarter for Cyprotex since its inception. We’d like to thank all the people within Cyprotex for putting up with the integration which is always quite difficult, and for Evotec’s somewhat complex processes, but they come step to the plate remarkably well.

Hello, this is Cord speaking. In regards to your question regarding this Celgene collaboration, the Celgene collaboration has gotten off to a very good start, excellent start and it’s fully staffed by now and we have made very significant progress already in this collaboration despite the fact that it was only started at the very end of last year. We are actually slightly optimistic that we will potentially achieve significant milestones already in 2017, so overall really a great start and we are very pleased with how it’s going at this point in time. Jean-Paul Mannie: Thank you very much gentlemen.

Next question please.

The next question is from Igor Kim. Your line is now open.

Yes, hello, Igor Kim from Oddo Seydler. Just a couple of questions. The first on gross margin, I think you said excluding milestones it’s around 29%. Do you expect it to increase further over the year? And second question is on your outlook performance for 2017, 16% top line growth and do you think little bit kind of conservative, given the major chunk of the growth in the first quarter, or is that just as you said results, the business is rather back-end loaded. And the last question is a question on R&D tax credits, should we expect a similar run rate for the rest of the year? Thanks.

Thank you, Igor. The first question will be answered by Mario. Second question I will comment on; and third question will be answered by Enno.

First question.

Oh sorry. First question will also be answered by Enno, sorry.

Hello Igor, this is Enno speaking. So, I’m happy to answer those questions obviously. Let me answer your gross margin. I think it will be in the same area as it is currently is ongoing, so that should be in the same level. And maybe then picking up the R&D tax credits already, so that the development that we see as I said right now is pretty stable also compared to previous year with regard to UK and we will see a slight increase in France, which is kind of correlating to the increased expenditures there on client work which we can also then apply for R&D tax credits, but it will not be huge dev ops compared to what we see right now.

Thank you so much. So this was Enno to be precise. Commenting on the guidance, what you should take into account is that we see a clear limitation when it comes to capacity. And we have a strong commitment not to grow and dilute quality in the company. So we really take it much more serious to say let’s rather grow "only" by 15% in the fifth year in a row now to stress also the long-term trend here than to grow too fast and dilute quality. And I think with this the outperformance of our guidance on the top line and on the bottom line will depend on milestones if we can achieve them or cannot achieve them. We are very confident for the year to achieve a certain level of milestones, but for the rest of the milestones that would drive outperformance, we just don’t have any visibility at this stage and we don’t want to create any expectations in that direction. So, that’s why I think it’s fair to stay with the current guidance and that’s why we hear, do what we are supposed to do to give a true and fair view on the business. Nevertheless, let me stress that we feel comfortable, yes, very comfortable at this stage to perform.

All right, thanks a lot.

Next question.

Next question we’ve received is from Falko Friedrichs, Deutsche Bank. Your line is now open.

Hi, thank you for taking my questions and I would have three, if I may. First, following the positive announcement of the preclinical proof-of-concept in your diabetes alliance with Sanofi, did you note an increase in requests for you iPS cell platform? Secondly, and out of the €6 million milestones in Q1, did I understand it correctly that you said that the €3 million was from Sanofi and roughly €1.5 million from Bayer. And if I understood that correctly, would you mind sharing where remaining €1.5 million are coming from? And then lastly, in terms of new drug discovery agreements that you are starting at the moment, are you seeing a regional trend here or is it across-the-board?

Thank you so much. The first question will be answered by Cord, the second by Enno and the third by Mario.

Well, thank you very much. With regards to the question regarding the iPS cell platform and it has increased interest. I would say that the interest in iPS cell technology and the use of iPS cell technology in drug discovery continues to grow significantly. And I would even go as far as to predict that there is a – currently I would say it’s still the minority of companies using iPS cell technology for drug discovery purposes in the CMS field. Looking forward, I would say, in a few years from now, it will be unthinkable to work in neuroscience in particular, but also many other areas without the support of iPS cell drug and drug discovery platforms. And we continue to actively expand our efforts here and we are once again very optimistic that the iPS cell platform will lead to further partnerships.

Thank you so much. Enno?

Okay, coming to your second question regarding the €6 million which is actually not only milestones, but it also includes upfront payment and licenses and but your conclusion is fully correct. Out of this €6 million, €1.5 million roughly is upfront and licenses. We have in total €4.5 million milestones out of which three are from Sanofi.

And then – hi, this is Mario. I think if we look at our revenues by region and if you make some sort of corrections to the very strong contribution from Sanofi, we are nearly about 50-50 in terms of the business that we do in the U.S. and Europe. We see continued very strong biotech trends both in the U.S. and also especially now in the UK more recently, going out into Mainland Europe, as well as a very strong penetration of big pharma into the U.S.; in Europe more midsized pharma, and in Europe I’d say there is an even split. We see that outsourcing we anticipate continues to grow at about 10% to 15% per year and that we probably, as you can see from the figures today, and from last year, outstripping the growth in the outsourcing market by the Evotec growth. So a fairly even split strong biotech and pharma economy for us to be able to outsourcing into.

Maybe to add one little comment on that, that’s why we highlighted it, we are very happy on a regional split, that’s where your question also went Falko, is that we see Japan back in our order books and which was not the case in the last years that strongly, but there is and it overtakes very long in Japan, but we see also Japan going back into high-quality drug discovery first-in-class initiatives, which again will not be assured to short-term losses, but the long-term, I would think too fast to play.

Okay, great and that was the main reason I was asking that question, so that’s great, thank you very much.

Thank you so much.

The next question we’ve received is from Mr. Devani, Rx Securities. Your line is now open.

Thanks for taking my questions and congrats on a good quarter. I have just a couple. First of all, if you could confirm whether the Cyprotex revenues were gross margin enhancing to the business during the quarter? And also, you mentioned that you could potentially see significant Celgene milestones potentially this year, will it be right in assuming that might be I think that’s higher than what you just received from Sanofi? Thanks.

First question goes to Enno, second question I will comment on.

Yes, so the first question regarding the Cyprotex margin, yes, we do have a significant positive margin contributing from Cyprotex out of these €6 million, which is in the framework of what we expected. And so therefore, it’s really on the same levels as you see on average margin, a margin within Execute.

And on the dimension of milestones within the Celgene contract, we see a different range of potential milestones depending on the different stage of projects, where they have to be opted in or not opted in by Celgene. So, therefore, it’s not possible to give a dimension of the milestones at this stage, because it really comes down to where do we hit one, and that’s why it would be not appropriate to at this stage guide for higher milestones as we have seen them. Having said that, milestones are depending on biology risk and if they would be certain then we would guide them. So, please, please, please bear in mind they are not certain, they have to be achieved on highly complex biology.

Thanks.

Thank you very much, next question please.

The next question is from Victoria English, Evernow Publishing Limited. Your line is now open.

Yes, thank you for taking my call. I have two questions, both regard the iPSC platform. The first concern is the diabetes situation, I can’t remember whether your agreement with Sanofi is exclusive or whether you would be able to expand your iPS technology in collaboration with any other companies, say, Novo Nordisk for example. The second question concerns the use of iPS cell degeneration, it’s not clear to me when you talk about novel therapies, what we are talking about. Are we talking about replacement, a cell replacement, what are we talking about?

Thank you Victoria for your questions. So, first of all, in regards to the Sanofi agreement, the – it’s an exclusive agreement on the use of iPS cell to our human beta cells in diabetes. And in regards to further uses of iPS cell technology for drug discovery, Evotec, in particular, focuses on using iPS-authorized disease models to our drug discovery purposes, in the small molecule, but also large molecule field.

Right, but in the case of neuro-degeneration you are talking about developing novel therapies?

Yes, and this is based on, in particular, small molecules and potentially out for large molecules.

I see, okay.

But we exclude for, at this stage, that we have the highest priority on creating novel cell therapy.

Got it, okay thanks so much.

Yes.

The next question we’ve received is from Mr. Volker Braun, Bankhaus Lampe. Your line is now open.

Yes, thank you for taking my question. As to come back to Cyprotex and the contribution in Q1 and also Enno mentioned with a Swiss-based company, could you tell us a bit more about this collaborations with Cyprotex alone or is it a combined offering with Evotec – former Evotec technology? And is there already a P&L impact in Q1 included? And secondly, you mentioned Japan that there is more interest coming from there. Is this related to iPS cells as the history of M-cells is a bit longer in Japan, or is it broadly based on all the offerings you have to offer?

Maybe I take the second question briefly and the first question I would then hand back to Mario. The – as you know, in Japan you see a range of pharma companies and other companies working on iPS cell technologies in Japan. And our, I would say, renewed interest in Japan is really the broad range of what Evotec is offering, especially in our drug discovery services that we are providing in the Execute segment at this stage. Having said that, many of these discussions start on one end and then just leads to further discussion, but one thing you just have to be certain when you go to Japan, it will take long whatever you discuss with them and that’s just the process. And on Cyprotex, I hand back to Mario.

Thanks for the question Volker. There is very little Q1 impact on this new strategic deal with the large pharmaceutical company, so it’s signed a few weeks ago. We’ll build up in terms of volume over the course of the next year or two. The deal itself is very much based on the Cyprotex technology and completely validates while we acquired this particular technology. We don’t have the high throughput nature and instrumentation and experience to do this kind of large-volume admin profiling that Cyprotex have and this is what this deal is, it’s a continual flow of compound, so increasingly the discussions we’re having with large pharma were, we just want to throw the compound out of that projects and get away fastest, but best quality data of that. So it’s very much a testament to the excellent technology Cyprotex have and perhaps a little bit more the business development needs that Evotec were able to bring it, so we’ve managed to capture the synergies that we thought we would.

All right, thank you.

Also making a little disclaimer that it’s early days and of course we are very happy that we have the first, let’s say, quick win on this transaction and as you notice, very often gives momentum, but we are long enough in this business to know that these things have to be looked at in several years from now. But we are very happy about the start of Cyprotex and we are very happy also to mention that about the integration that Mario had already pointed out, how we have really managed to get a culture together with our new colleagues in Alderley Park.

All right. Thank you.

There are no further questions so far. [Operator Instructions]

If there are no further questions, then let me thank you again. Let me thank you for following up into the start of 2017 and I’m happy to report back to you together with my colleagues after the second quarter in 2017. All the very best.

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