Ladies and gentlemen, welcome to Evotec AG Annual Report 2019 Conference Call. [Operator Instructions]. May I now hand you over to Dr. Werner Lanthaler, CEO, who will lead you through this conference. Let's -- Sir, please go ahead.

Thank you so much. Welcome to Evotec. This is Werner speaking. We have uploaded a presentation that we would invite you to take on and follow us through this conference call. If you go through this presentation, you will see that we took a very bold word and put it on the front page called excellence. Excellence is a result of long-term learning processes and consequence execution. As drug discovery and development partnering company, we are striving for excellence in everything that we repeatedly do. So excellence for us is not a single act, but it's a habit. That's what we are sharing and multiplying every day and that's what we try to bring forward to our partners every day. With this, let me introduce my team who are building a culture of excellence within here. I'm here with my CSO, Cord Dohrmann; our COO, Craig Johnstone; and our CFO, Enno Spillner. The 4 of us will guide you through this presentation, which you see on Page 2 with the SE mark on the top line. This SE marks that we are converge -- that we are in the process of converting our legal format from an AG into a European SE legal format of the company, which we hope to complete in the next days. If you go to Page 3 of this presentation, you see the agenda that we want to go through together with you by starting and showing you some of the highlights that you see on Page 4 that has been achieved this year. We think that we have done many steps in the right direction. And it's important that what counts for us is to do many small steps in the same direction because that's the way to get to a goal that we want to achieve in the long run. The greatest reward for us is the opportunity to do more of what we have started in the last 10 years and to continue this path. And it is fair to say that this path is just at the beginning. When you look at the highlights, both segments have delivered extremely well. We have started not only new discovery alliances, but we have also extended our existing alliances. The integration of Aptuit is going in the right direction. And you see that many of our Innovate initiatives will be highlighted by Cord later on in this presentation are creating huge upside momentum for these companies in the decades to come. When you look at the lowlights, we also want to point out that not everything always works in a company. Sometimes, things fail. Sometimes, things have to be stopped. That's the nature of our business, and that's also something that in all transparency, we want to share with you. When you go to Page 5 of this presentation, you should see that we have a long-term plan, which we call Action Plan 2020 -- oh, sorry. Action Plan 2022. This is the consequent continuation of the path that we have started with Action Plan 2012, Action Plan 2016. And what it does, it gives us a framework. And we can confirm all goals that we have set ourselves within Action Plan 2022 that all these goals are in place, and we are either achieving these goals or are in the process of trying to overachieve these goals. This is our ambition and that's what brings us forward. You have to believe in the long-term plan. But you also have to have short-term successes that reward and motivate you. You have to look at the year 2018 as just one short-term success that we want to share with you, but our plan is to continue and go forward. What you see on Page 6, our strategy is long term and our strategy is fully intact. It's fully intact despite the situation that we are preparing for, that some subsidies from our partner Sanofi be -- for example, be gone in the year 2020. We are -- that's just one partnership where we know it will fall away, but the 200 other partnerships that we have built are, of course, intact. And many of them will be added to these that we have in place here. When you look at these long-term plan here that we illustrate here, we also give you some guidance on the numbers that you can expect for 2019 and going forward. The thing we want to highlight is that we continue to invest into our unpartnered R&D at a highest pace than -- a pace than ever before. And that we want to build a company that will stay profitable every quarter that you will see in the future. When you go to Page 7 of this presentation, you should see that what makes us tick and what motivates us are our people. Product successes are successes that cannot be achieved anymore of small groups alone. If you want to win product launches in this industry, you have to align with high-performance teams along the value chain. Together with Evotec, here, many things are made possible for our partners because our people are the best that are in the industry. This is the main reason why we grow. And this is the main reason why we want to attract even more talent going forward. And that's the main reason why we continue to grow strongly also into 2019, '20 and going forward. The megatrend of excellent innovation is just at the beginning. With this, let me hand over to Enno, who will bring you into our financials.

Yes. Thank you, Werner, and a warm welcome also from my side to the audience today. It's a great pleasure introducing you to our 2018 financials and providing some details on the respective numbers. 2018 once again was, financially speaking, a very successful year with new financial heights across various lines in our P&L, balance sheet and also operating cash flow. On Slide 9, a few comments on our guidance. In 2018, we adjusted our positive guidance twice to the better, confirming the very positive business performance during the course of that respective year. One's and all this due to the successful acquisition of ID Lyon and the respective change in our expected R&D expenses, which we are supposed to increase due to this strategic move, which we took in the Innovate segment. The second change took place in December 2018 after it became transparent and obvious that we most likely would outperform our EBITDA target for 2018 due to the strong business performance leading to increased margin contribution to a milestone on these achievements in the fourth quarter as well as increased other operating income due to, for example, research and development tax credits. So in total, we clearly overachieved our revenue and our adjusted EBITDA targets by showing a growth rate of 42% or even 67%, respectively. Some of you may have noticed that revenue and EBITDA numbers for 2017 have been adjusted quite a bit on this slide on Page 9 and compared to the original financials reported 1 year ago, which is due to the restated numbers in compliance with IFRS 15, which is mandatory for 2018 onwards for your better comparison. So let's take a look a little bit more into the details of 2018 numbers starting on Slide 10. Revenues increased significantly due to 3 major effects, namely: growth of base business and increase in received milestone payments as well as the first full year cycle of Aptuit contribution on the latter. So Aptuit contributing only about 4 month or 4.5 month in 2017. Gross margin is reflecting the adjusted business mix after the addition of Aptuit plus recognizing the full year amortization of Aptuit. And so it protects from our purchase price allocations, affecting the gross margin by €12 million. And without amortization impact, the margin would have been at roughly 33% in 2018. With regards to R&D, we record a doubling of our R&D spend. Main reasons here or main reason here is the addition of our ID Lyon activities added effectively from July 1, 2018, and triggering additional significant R&D expenditures of roughly €12.7 million for this second half year of 2018. We call this part of R&D partnered R&D because these expenditures are being reimbursed by Sanofi during a period of five years. No surprises and no comments on the SG&A, just showing an under proportion of the growth compared to all the other key numbers here. Some impact, however, is on our P&L and triggered by the income from bargain purchase as a positive one-off effect from the ID Lyon transaction when taking over the French legal entity for just €1 while containing higher cash and some asset positions. Please note that this onetime effect does not go into our adjusted EBITDA, but affects the net come -- net income only. Other operating income overall was very positively affected by increased R&D tax credits being recognized in Italy, in France and in the U.K. One part of this increase is, obviously, due to a positive one-off effect from tax credits relating to 2016 and 2017, which was approximately €3.5 million. The other 2 major positions within the other operating income were recharges from Sanofi for our ID Lyon activities, as just indicated, and release of our earnout accruals from a write-off that Werner just described briefly. On Page 11, we take a look at the overall trends of some of the major KPIs of Evotec. And we can clearly observe that the stronger positive trend is being consistent over the -- has been consistent over the past years and it's supposed to be so for the next years to come. The combination of organic growth and strategic growth, in particular, fueled the growth in 2018, reflecting the first full year of Aptuit while at the same time, base business and milestones kept growing as well, plus a broad and solid increase across the different fields. Obviously, we want to continue to walk the strong growth path also in 2019 by growing Evotec's group revenues and adjusted group EBITDA each by approximately 10% organic growth while keeping our gross margin stable in the range of or above 30%. You may have recognized that group revenues for 2018 are about $11.4 million less here on the slide and compared to the previous pages. For better transparency on the net operational growth, we excluded revenues from recharges according to IFRS 15 in this graphic. Also, for a better comparability, we have adjusted our group EBITDA here, excluding the before-mentioned one-off effect of €3.5 million stemming from R&D tax credits correlating to the previous years to being off the reporting period. However, we will revert to a more detailed guidance at the end of this presentation. On Slide 12, there's not too much to comment on with regards to our segments on this page since most of the growth and one-off reasons have been just described already on the consolidated level. It's the same impacts that we see on the original segments. Gross margin is in particular high in the Innovate segment, again, due to the strong milestone contribution. And as the $15.4 million bond purchase impact is a transaction-driven one-off effect, we didn't allocate this to the segments. Other operating income contained approximately €12.7 million of partnered R&D costs, thus, being reimbursed by Sanofi in context of our new ID Lyon efforts. Please also note a new column in this slide named not allocated. Revenues shown here on this segment consist of revenues from contracts with customers without revenues from recharges. And those are not of importance to the management to assess the economic situation of the respective segments. Thus, segment reporting is not considered revenues from recharges for IFRS 15. However, on the group consolidated number -- numbers, we will, of course, show our financials including revenues from recharges according to IFRS 15. Last but not least, looking at Q4 numbers on Slide 13, which clearly underline the continued growth trajectory going forward. Despite seeing less income from milestones in Q4 compared to the previous quarters of 2018, revenues stepped up by 14% due to improved base revenues while at the same time increasing the gross margin to almost 27%. All Q4 revenues from both segments are considered organic growth due to Aptuit being onboard already since mid-Q3 of 2017. Total R&D expenses almost tripled while €7.1 million out of the €14.7 million stated here relate to partnered R&D, again, being cost covered by Sanofi under other nonoperating income. Also, increased R&D tax credits fueled our other operating income in Q4, increasing this line significantly to almost €21 million. All these positive effects resulted in a significant adjusted EBITDA increase of 47% -- 46%, sorry, 46% in Q4. Thank you.

Thank you, Enno, and good afternoon from me to everyone on the call. It's a great pleasure for joining this team in such an exciting time. I'd like to bring us to Page 15. And this simply -- this is a diagram that simply represents a remainder of our related business model to which we offer access to our scientific excellence and create value for our partners and ourselves, whether it's through an FT or a fee-for-service model or by means of advancing technologies and assets internally for partnering later. It's our intention to build up a broad valuable portfolio of co-owned projects, which have built-in quality for survivability and success through the development process. This is what we do. And on Page 16, I'd like to give you a flavor of how we do it. The product of scientific excellence and operational excellence or excellence squared is laid out here. Drug discovery and development is still a highly human endeavor. It requires creativity, inventor step, inspiration, innovation. But it also acquires expertise and experience and drawing on a long and strong track record to solve some of the more difficult problems in drug discovery and development. These difficult problems typically occur at the interdisciplinary interface and require close interactions between scientists of all realm and disciplines to create the conditions for problem-solving and inventive step creation. High science and high technology, of course, have a critical role to play. And machine learning, deep learning and artificial intelligence all contribute heavily here. And then in addition, the humanization of our case cascades are all increasingly important factors when working really at the cutting edge of drug discovery and technology development. And of course, all of those great characteristics have to sit on top of a very well-oiled high-performing system of operational excellence capable of delivering high quality and high speed of results. And successful integration, while we speak to those, how Evotec succeeds in delivering even on the most challenging projects with the highest possible quality, the highest probability of success and the highest speed for our partners. And this is, in essence, our philosophy. And we think, as shown on Page 17, that this philosophy has contributed to a very successful year in 2018. Major new partnerships such as those in here, Novo Nordisk, Ferring, LEO, for examples, as well as an ongoing and extended existing collaborations. Indeed, the number of partners contribute in over €1 million of revenues each grows by more than 50% in the year. And we believe the unparalleled high-return rate of greater than 90% is a testament to the quality and satisfaction. And that's true in all our major business lines. Most specifically, on Page 18, we see that the integration of Aptuit has completed our ability to support our partners all through the value stream. But very importantly, we firmly believe that the ability to anticipate and indeed, assess experimentally the potential pitfalls and development means that we can help our partners create candidates which are more development-ready and pass them into preclinical, regulatory and clinical development stages faster and the less chance of delays later due to technical weaknesses. This theme of philosophy of integration across the disciplines continues into development, as shown on Page 19, with our INDiGO offering, which was launched -- relaunched in 2018. INDiGO is our fully integrated under 1 roof service, which brings together API formulation regulatory, safety, analytical sciences and very tight project management to enable us to consistently move candidates through R&D in 1 year or less, which we believe is amongst the best in the industry and certainly superior to alternative distributed approaches. And we're really delighted to see the first examples of internally conducted discovery projects launched seamlessly in INDiGO during 2018. We have a very strong pipeline of new opportunities in the coming year. This theme of integration also continues into what we call integrated CMC, Page 20, or iCMC. And we have also seen a strong pickup of this business segment as our partners appreciate the value of colocated analytical development, API, drug product and formulation, all of which blended together to provide the highest quality service. Even in many -- in some cases, all the way through to commercial product supply and niche indications. Page 21 simply reflects that we have a very diversary of really excellent high-quality partners in foundations; biotech; small, medium and large pharma. And this list grows each year in addition to the loyal or returning partners that we have. And in addition, we've seen a more balanced distribution in 2018, approximately evenly split 1 fold each between big pharma, biotech and foundations and midsized pharma taken together. And this strong client base sets us up for continuous success in 2019, as shown on Page 22, with new contracts and extensions. In addition, following the completion of the scientific integration of Aptuit, we've seen a really excellent start to 2019 from that business segment. Looking ahead, we look forward to bringing the news of capacity increases to meet increasing demand and fuel further growth as well as scientific and technical advantages at the cutting edge of drug discovery and development and in particular, the role of advanced computing and artificial intelligence. And for me, personally, AI represents really quite a natural extension of our ambitions to conduct the highest quality work with the highest efficiency and effectiveness at the leading edge of our industry. And the timing is perfect with data -- increasingly volumes of data and high competition per coming together simultaneously. The ability to augment and enhance human creativity and know-how with the highest quality computational prediction offers potentially dramatic breakthroughs in speaking quality in many aspects of drug discovery and development. And we're investing in this field to ensure we're at the forefront of this for ourselves and for our partners. With that positive outlook for 2019, I'd like you -- to thank you for your attention, and I'll hand over to Cord to take over the next segment.

Thank you, Craig, and good afternoon to everybody on the call. As always, it is my great pleasure to summarize the progress we have made within Evotec Innovate in 2018. As Enno already mentioned, Evotec Innovate revenues very significantly increased to €69 million in 2018. This represents an accelerated growth of revenues by close to 6%. And thus, another fantastic year for Evotec Innovate. The growth on revenues has associated that significantly improved profitability has been achieved despite €35 million of R&D investments, the highest level of R&D investment since the inception of Innovate. Even more importantly though, through Innovate, we continue to deliver pharma partnerships, which not only generate R&D payments, but most importantly, enable Evotec to co-own drug opportunities whose development is fully financed by our partners. Our current pipeline of co-owned drug product opportunities is shown on Page 23. The pipeline consists of well over 100 co-owned projects, all of which are associated with substantial financial upside for Evotec. This upside consists of potential milestone payments that are usually in the range of €100 million to €300 million and tiered loyalty payments that reach into double-digit percentages of every potential product sale. The key measure of our success here is not only the steady expansion of this pipeline, but also the progression of individual project along the value chain. In both aspects, 2018 was a tremendously successful year as can be seen with the many key highlights shown on the pipeline chart. Unfortunately, we won't be able to go through all of the highlights, but we would like to point out the progress we have made in clinical stage drug opportunities. Most importantly, our partner, Bayer, initiated 2 Phase II studies in chronic cough based on compounds originally identified with our endometriosis collaboration. Furthermore, our partner, Second Genome, started a Phase II trial in NASH. And we had two additional clinical starts with Bayer, initiated another Phase I study in endometriosis. And our partner, Boehringer Ingelheim, initiated a Phase I study in the field of respiratory disease. So in conclusion, 2018 was yet another fantastic year for Evotec Innovate. Innovate delivered significantly accelerated growth and profitability despite substantially higher R&D investments. And we expanded our co-owned pipeline more than in any other year and achieved very significant milestone, bearing progress in many co-owned projects. Thus, 2018 provides yet another solid confirmation that our Innovate strategy is highly productive and a key value driver for Evotec going forward. On the next page, Page 24, I would briefly like to mention the progress we have made in all other aspects of Evotec Innovate. The iPSC-based drug discovery platform delivered multiple important milestones out of our Sanofi diabetes alliance and the Celgene new degeneration alliance. Similarly, we have made tremendous progress in our Bayer kidney alliance with the achievement of multiple important milestones. Furthermore, we built a number of new pharma alliances. Here, we would like to mention, in particular, a new alliance with Almirall in dermatology and a new alliance with Sanofi in infectious diseases. Beyond this, we are very proud to have signed 2 new alliances with Celgene in oncology and targeted protein degradation. Finally, as part of Evotec Innovate, we also continued to grow our equity investment strategy as well as our core academic, which is a partnership portfolio. On Page 25, you can see that our portfolio of Evotec Innovate partnership continues to grow, and some existing alliances have also grown in scope. Both Celgene and Sanofi are important partners of Evotec and we very much appreciate the fact that they have selected us for further partnerships. The Celgene, in particular, designed 2 new alliances in oncology and targeted protein degradation; and the Sanofi, a new alliance in infectious diseases, in particular, highlight was, of course, our new Celgene partnership in oncology and targeted protein degradation as this comes or came within a combined upfront payment of well over USD 65 million as well as substantial upside in terms of potential milestones and royalties. Moving on to my next slide, Page 26. I would like to shift gears a bit and discuss recent investments we have made in platform technologies and give you a bit of an outlook where we are heading with this. With the emergence of new technologies, it is possible to fundamentally change the drug discovery paradigm on multiple fronts. At Evotec, we have decided to invest in a number of these technologies to build a game-changing drug discovery platform that will redefine health and disease, enable more disease-relevant screens and allow a seamless transition from the laboratory bench to the clinic. It is important to stress that these investments should not be seen in isolation. They ultimately combine into 1 coherent molecular phenotyping platform, which can be used to redefine the diseases and leverage this knowledge into more disease-relevant drug discovery programs. This was accomplished through the systematic profiling of patient samples by a high throughput Omics technologies, which generate patient-centric molecular phenotypes and signatures. These molecular signatures in turn can be subsequently used to identify new targets, pathways as well these relevant readouts lead in biomarkers for clinical development. As molecular phenotyping relies on routine use of Omics technologies and leads to the generation of very large data sets. In order to manage and interpret these data sets, it is important to use supporting artificial intelligence and machine learning platforms. And which then help to guide to the development of more patient-centric, thus more efficacious drug candidates. Ultimately, these new drug candidates can then be tested in the most relevant patient populations, which are selected, once again, on the basis of their molecular phenotypes. This is expected to substantially increase the rate of successful clinical developments. So in conclusion, we would like to make the point that our investments into platforms such as iPSCs, PanOmics, artificial intelligence and machine learning are not isolated bets, but rather serve a longer-term strategy to build a seamless patient-centric drug discovery platform. On the next slide, Page 27, you can see that we are already well on our way to redefine chronic kidney disease according to molecular phenotypes through our participation in the NURTuRE consortium. Through this collaboration, we have access to what probably is the largest cohort of chronic kidney disease patients. All in all, it encompasses about 4,000 patients with complete clinical history, including drug treatments as well as blood, kidney and urine samples. Evotec will conduct a molecular phenotyping for these patients to build the world's largest molecular phenotyping database for chronic kidney disease patients. On the next slide, Page 28, you can see how molecular phenotyping of patients can seamlessly integrate into screening paradigms using patient-derived cell-based assays, which are only possible through iPSC technology. We are continuing to build and expand our iPSC-based drug discovery platform and have made great progress in generating new cell paths, which can be seen in the next slide. These new cell types include, for example, podocytes, which are a key cell type in chronic kidney disease, but also others such as retinal pigment epithelial cells. And programs that we have under development for quite some time now are becoming more and more mature. Beyond the podocytes and the retinal pigment epithelial cells, we are particularly excited about more recent -- the more recent establishment of a microglia platform, which allows us to expand our efforts in newer developmental and newer degenerative disorders where microglia plays a major role. In the next slide, Page 30, I would like to give you a brief update on our infectious disease franchise. In the last few months, we have thoroughly reviewed and reprioritized the portfolio, primarily focusing now on antiviral and antimicrobials. Our main focus will be on curing hepatitis B viral infections. Here, we are pursuing three independent approaches, all of which are directed to cure HPV infections rather than just contain them. In the antimicrobial portfolio, we had already created two new partnerships with the Helmholtz Centre for infection disease, we signed a risk/reward sharing partnership. This partnership is based on work from the laboratory of [indiscernible] Rob Miller and it's focused on developing a novel class of natural products into broad-spectrum gram negative antibiotics. We are proud and excited about the collaboration that -- with the Helmholtz and in particular, this progress of [indiscernible] Miller. In addition, we recently signed a second partnership with the Global Antibiotic Research & Development Partnership, also called GARDP. GARDP is cosponsored by the World Health Organization and the Drugs for Neglected Disease Initiative. GARDP is an important element of the World Health Organization's global action plan on antimicrobial resistance. This partnership with GARDP has the potential to become highly strategic in nature as we intend to jointly invest into superior platforms and highly innovative drug discovery project in the field of AMR. The following slide is just a reminder that our extended BRIDGE strategy is fully on track and continues to strive. In 2018, we have added two more BRIDGEs, LAB591 and LAB031. LAB591 is a partnership with the Fred Hutchinson Center of Cancer Research Eric Brine, scientist [ph], which is the venture investor. And LAB031 is a partnership with Sanofi to advance early-stage academic research, primarily out of France into full-fledged drug discovery -- drug development projects. Finally, on Page 32, I would like to end with an update on our exit year strategy, which is becoming an increasingly important component of our co-owned pipeline building strategy. We have been able to raise very significant follow-on rounds to a number of our portfolio companies, such as Facio or Exscientia; and other portfolio companies, such as Eternygen and Fibrocor and have signed significant pharma deals. So also, here, we are very excited about the progress and expect to expand the strategy going forward. On my last slide, Page 33, I would like to give an outlook of what we can expect to -- for 2019. Looking forward, we expect another excellent year as we have already achieved quite a few important milestones in 2019. In particular, we intend to further expand our pipeline of co-owned product opportunities through new partnerships. We expect significant progress from projects in our current pipeline, and we intend to initiate new academic bridges and invest into spinoffs and startups. So in conclusion, 2018 has been yet another fantastic year for Evotec Innovate. We firmly believe that our strategy of building a co-owned product pipeline is still only at its very beginning, and we are very proud and very much looking forward to an exciting 2019. With this, I would like to thank you for your attention, and I would like -- to Werner.

Thank you so much. Bringing all of this together and summarizing this should bring it to the outlook for 2019 going forward. And I think it is important to stress, as you see on Page 35, that it's a strong year ahead and that the state of the company is strong. But it's just how Cord already framed it, it's the beginning of a longer path that we are on, but we are happy to, at this stage, announce that we expect double-digit growth on our revenues with approximately 10% -- we expect approximately 10% EBITDA growth. We have to take into account the onetime effect that you have seen in 2018 with the number to compare to the €92 million. And very importantly, we are increasing our focus in partnered investments to about €30 million to €40 million in order to create long-term upside value for the company and for our shareholders. With this, we want to round up this -- the results of our 2018 and want to thank you for following Evotec, for supporting us. And we want to thank you for continuing the support that you bring to this company. Thank you so much. With this, I hand back to you, operator, and we are hoping for your questions.

[Operator Instructions]. Our first question comes from Falko Friedrichs from Deutsche Bank.

Three, please. Firstly, can you give us an idea of the time line for potential partnering of these other indications on your iPSC platform? Secondly, can you share how the integration of the infectious disease units from Sanofi is progressing? And whether the pipeline projects there are also progressing in line with your expectations? And then thirdly, on M&A, is this still a focus for you in 2019? And can you share which areas would be of most interest to you when thinking about potential additions?

Thank you so much, Falko. I will take the third question on M&A, question number one on future partnering; product Innovate, I'll give back to Cord and also the integration of infectious disease, I'll give back to Cord. When it comes to M&A, you should always also look here at the long-term view of this company that in the last 10 years, we've done 9 inorganic steps in our growth. Continuing this seems logical, especially in the light of the ability to better understand what it takes to make long-term successful integrations. And here, as we all know, not all M&A transactions on the planet always have a positive outcome, but I think our learning curve in what it takes to make successful integrations is a very good one. And that's why I think we are a company that is a good home for M&A transactions to be done. Having said this, the focus areas are clearly here to get stronger in what we already do. That's the first thing. And what we do is integrated drug discovery projects. Integrated drug discovery projects translating into development, how we have shown this for the INDiGO and development aspect, adding to that to make the value chain more complete. But I think a very important step, broadening this to having more modalities on the platform is definitely 1 priority that we set for 2019, 2020. This goes into expanding, for example, our cell therapy approaches discovery into expanding our biology/antibody approaches. This goes into expanding our approaches that we do in all modalities. But that's 1 aspect. The other aspect is something where I think taking on more co-owned projects in the form of as we have done this is something when a project fits to our areas of strengths. There's almost no limit of how we could build this on our platform. And I think that's why we are staying very picky, staying only for high-quality assets here, but we never exclude moves that we can do here. Question one and two, back to you, Cord.

Yes. Thank you, Werner. So in regards to the time lines on potential partnerships for iPSC-based alliances, this is a tough question to answer. Essentially, at this point in time, we are still very much focused on delivering on our -- the existing alliances. And we would argue that we do this quite successfully, as you can see, through the various milestones that have been achieved in those partnerships. Beyond that, we have actually expanded these partnerships for both the diabetes as well as the degenerative partnerships with Celgene a couple of times because they have essentially added to existing partnerships. And that, of course, takes -- that is essentially an expansion. We are or we have prepared the groundwork, I would say, for multiple additional partnerships here. And we have -- we do have a number of discussions with these. But when exactly they will come to fruition, it's hard to predict. On the integration of our infectious disease unit in Lyon, we have made great strides forward here. And I would say, in many areas, fully on track on bringing really new platforms through the field of infectious diseases. And without going into too much detail, I think you will see that especially when we are going to talk about in the future about our HPV portfolio, these are going to be new modalities. These are going to be new approaches to old problems. And we, hopefully, will come to highly innovative solutions to these old problems.

Our next question comes from Jonathan Hagan [ph] from RX Securities.

First of all, could you give us an idea of what the R&D tax credit level going in your operating -- other operating income line in 2019 might be? Second question, I was wondering if you could give us an idea of the INDiGO -- the rollout of INDiGO is going in line with your expectations. Could you possibly disclose what proportion of the Aptuit revenues you've got from INDiGO in 2018 and what the long-term target is? And then finally, just some -- you've spent a lot more in CapEx this year. Just want some guidance going into 2019 if possible.

Pleasure. R&D tax credits will go to Enno, and INDiGO integration will go to Craig, and reason for CapEx expansion is directly here with me because that's just a reflection of our footprint expansion. It's a reflection of our total commitment to high-end technologies. And therefore, you should expect us to continue our CapEx investments. You should expect us to continue our CapEx investments however necessary to deliver excellence, but the level that you should plan for is at the same level in the past of what you have seen this year. R&D tax credits to Enno.

Yes. Pleasure. So for 2018, we have seen more than €24 million in R&D tax credits in total across both segments, please bear in mind and I referenced during the call, due to the one-off effects of roughly €3.5 million that came from 2016 and '17. And for 2019, you probably could expect a number that is kind of similar to what we had in 2018 in total.

INDiGO?

Yes. Thanks for the question, Jonathan. INDiGOs, as you'll appreciate, are really critical part of the transition between drug discovery and development, very attractive to be able to have that picked up and handed over, especially to biotech companies. And those biotech companies are exactly the ones who really appreciate the intellect and the capabilities we bring to that part. It's gone very well. We have arranged 15 parallel INDiGOs at any one time on the platform. And I would say that's fully in line with our expectations at the beginning. And the impact of how much that contributed and also the impact on the customer mix is evidenced in the Annual Report there, yet the proportion of biotech companies and our business mix has increased compared to previous years.

Our next question comes from Brigitte de Lima from goetzpartners.

Can anyone hear me?

Yes.

I've got three questions, if I may. So the first will be sort of going back to what you just talked about, the biotech. 2018 was really an exceptional year when it comes to bench capital funding and also the funds raised despite some of the leading funds in the field. And you -- it seems to me that you must have benefited based on what you just said. But can you just confirm if you've seen that trickling into Evotec. And also, if that trend seems to be continuing into 2019, would you see very strong demand from biotech, which has raised -- been raising a lot of cash in the last year? The second question would be on your machine learning tools and we've talked a lot about that back then. The feedback seems to be that it's still early days. You were very discreet, and there's a lot of expectations. Some people are more positive than others. And you're still working, I guess, from the first program that is meant to sort of hit clinical development, I guess, in the next year or so. If you look longer term and say once you've got the first couple of molecules out of the way, what are you really seeing expectations in terms of the gains you might expect to see with regard to three parameters? I.e., duration of the discovery process, that sort of percentage cost savings you may see per molecule that makes it successfully through discovery? And then thirdly, increase in the likely chance of success because I think it's this -- would be why you're doing machine learning and that's a tie because, I guess, in improvements people are looking for by using these tools. And then the last one, I guess, an easy one. Just going back to M&A. Although they're pretty big acquisitions, I guess, as everyone your competitive [indiscernible] we've talked a lot about. I always felt that was probably one of the largest remaining private companies in Europe and in this field -- in early-stage field. And I'm just wondering if this is -- when you look at perhaps was it -- whether it's going to get fit with Evotec or was it, I guess, too much focus in animal work and not really on your radar at that time they launched the sale?

The third question, I can answer immediately. Every acquisition that we wanted to make, we made. Others we don't make. On your first question, biotech funding is very clear megatrend, which we are benefiting from. It's also something where we are increasingly seeing not only that the funding trend is continuing, but what is more important than that is that the business models that risk capital is putting behind science is changing towards increasingly virtual models. And that's where the efficiency that our platforms provide to create data points really kicks in. And that's where you see I think again the value chain changing intermodal where positive data points are supported with a lot of capital, which is available very fast and negative data points should be shut down. Providing this capital elasticity format for data points, that's exactly what Evotec does. And that's why it's so appealing for risk capital to put it behind these models. And that's why biotechs who work that way are the companies that are highly attractive also for then pharma partnerships or pharma acquisitions because they come with data points but not with fixed costs. And that's what you have seen in the recent 12 to 18 months that many of the biotech companies, who worked with Evotec has been very nicely built into the pipelines and acquisition portfolios of large pharma companies. And there, I think, is feeding also the success that these venture capitalists then have. And that, ultimately, is the argument for them to raise the next round. So to make a long answer short, we always see a stop and go a bit on the public capital markets. But I think for the private capital markets, especially out of the U.S., we see this -- such a clear go ahead for more than intra-base funding than ever before into 2019, 2020, 2021, and we will benefit from that. On the 3 parameters of AI, that's the core numbers that Craig is asked every time. So maybe this time, a consequent answer [indiscernible].

Hi, Brigitte. The questions you asked are quite literally billion dollar questions, aren't they? The -- as you said, the approach we are taking is to be targeted and quick focused on the areas that we invest in because there are many areas that one could think of applying AI and machine learning right across the value stream. And then the problem becomes one of choice about we have to invest. And so we have been very pragmatic, very targeted and placing our AI investments in areas where we really feel there's a major inflection gain. In terms of the answers to your questions, I would say that even in the near term, and by that, I mean in the next 2 to 3 years, I think what's realistic and reasonable to expect is that the duration -- you asked about duration, you asked about cost and you asked about probability of success. I would say, it's quite reasonable to hope and expect that the duration of drug discovery projects from a standing start to IND submission could be consistently delivered at less than three years if we apply all that we have, even in front of us today, in a tight well executed and most advanced method. And that in itself would probably provide cost savings or substantial proportions, 30%, 40% per candidate would be realistic. But as you say, it really did -- the highest opportunity for gain is actually in adjustments of probability of success because as we all know, the major cost of -- the major attrition weighted cost of portfolio execution is actually in failure rather than the successful projects. And therefore, the inflection that we can bring to bear is really are in probability of success. And this is why Cord and I are both very much of the view that the integration of the translational par with machine learning on the interpretation of the data is actually where most gains in terms of prediction of clinical outcomes and probability of success, both for efficacy and for safety. Those are the big value drivers.

Our next question comes from Victoria English from MedNous.

Werner, I have three questions. The first concerns your opening remark about the SE designation. Can you first tell us if there's any operational impact that will have on Evotec? The second question concerns your comment about your partnership with Celgene, which you described as a targeted protein degradation project. Are we talking about misfolding of proteins? That's a technical question. And the third question is a bit more open-ended, and that concerns your comments about molecular phenotyping, which sounds very interesting. Where would you see this application in your company first arise? Is it in the drug discovery segment? Or is it in the conduct of your clinical trials or -- in terms of choosing patients? Where is this going to have its first impact?

Thank you so much, Victoria. Good to hear your voice yesterday in Vienna, today in Hamburg. Question two and three, Cord will take. Question one is very simply answered. There is no operational impact that we expect from the SE conversion. It's truly a simple reflection of our footprint that we want to really go to more European operation here and also European jurisdiction here. We've got operations in France, in Italy, in Germany and in the U.K. SE is really what should be the leading form that we have here. Nevertheless, of course, we have big operations in the U.S. as well, and we continue to grow in all these sites. But SE now seems the most appropriate format for us. Question two and three, I'll hand over to Cord.

Thank you for your question. So the Celgene collaboration in -- is really a collaboration that is very systematically explored. There are opportunities for targeted protein degradation, which means really the specific degradation of individual target molecules that are of therapeutic value. And this is a more recent approach that has emerged in academia and the pharmaceutical industry that it is actually possible to direct certain proteins for -- or target and for degradation for very specific degradation. And thereby, achieve potentially enhanced effects or target proteins that are not addressable or retractable via small molecules or other means. So this is a very exciting field for us. This falls under the bigger heading of protein homeostasis to really recognize and correct potentially disease element situations where proteins are either -- or mutant proteins are either expressed or wrongly expressed or are misfolded, all of that could fall into that absolutely. When it comes to molecular phenotyping and when it will have its biggest impact, that's very hard for us to say. We are using -- well, implementing molecular phenotyping in various settings. They're using it for the redefinition of disease. As I mentioned, in the context of chronic kidney disease, to really define kidney disease, chronic kidney disease situations. Particular in a more specific fashion, we use it for screening campaigns to actually get more out of our screening campaigns in terms of formation, what individual compounds profiles look like in terms of potential efficacy and safety. And we also are exploring opportunities here to then use enough phenotypes to devise biomarkers for clinical development. And the immediate impact is probably most strongly felt to us in drug discovery and screening space, but going forward, this could be -- the other areas could be just as well the cutting edge of this.

[Operator Instructions]. Our next question comes from Mick Cooper from Trinity Delta.

I have a couple of questions. With -- when you're looking at making investments, can you give a bit indication of what your -- the targeted ROI that you're hoping to achieve on your investments? And I appreciate, it's very early. But can you give us indication of what you're tracking towards achieving that? And secondly, you've got increasing number of iPSC protocols now, either done or in development. If you can't find a partner for the -- to use those iPSC cells, might you use them to develop drugs yourselves and how far might you take those drugs?

Thank you so much. The return on investment for our "Evotec venture investments" has to be 100% aligned what the risk/reward profile of such an investment represents. And there are different risks of what profiles. But in our industry, it has pre-venture returns like investments that we are doing here that's -- that's what we're going to answer where everything has to go way beyond 3x expectation. The second thing that you should see here is, we never wanted to be a financial investor because bringing finances to bear is "almost a commodity." What Evotec does is we bring platforms to work. What essential progress really means is that you can make projects better by linking them up with our platforms. And that's the key that ultimately makes these projects better and allows them to continue on these platforms into INDiGO projects and into early development projects. That's also I think a key feature of the investments that we do to allow these other companies within this environment. And when it comes to projects that are not partnered or not partnerable, I think here, you don't know Cord well enough, that there is a very clear stop-loss logic in our company, that we would never go forward by default because we don't find a partner. And then all of a sudden, by accident or end up developing products. So I think that's very important that we look at it the other way around. As we have a platform on this platform, we can bring products forward into the clinic. And therefore, there is a seamless path that these projects can be supported on, but this path is not supported by default. This part -- this path is supported by enthusiasm that we have for this projects. And if these projects on their way bring a term sheet, every term sheet is evaluated if it's better for us to partner or to wait before partnering. As Cord has mentioned, at this stage, thanks, God, there is no shortage on partnering interest, especially when it comes to our iPS platform.

[Operator Instructions]. Our next question comes from Marish Johan from Instant Research [ph].

It's Marish Johan [ph] from [indiscernible]. Firstly, on R&D this year, we're expecting -- if you strip out the infectious disease payments, the underlying R&D was -- I think is around 50% growth. Can you help us understand what that's being spent on? And are there any -- how do we kind of value the expected returns from this kind of comment to your growth. And assuming that growth will continue, so are there things moving into late stages? Are the new assets going in there? And are there milestones for those issues toward this, that would be helpful to have a feel for that. Secondly, on kind of bigger-picture question. The business is getting increasingly complex now with 100 co-owned products, [indiscernible]. For BRIDGE investments, I don't see your whole end technology platform like iPSC, which themselves are in a -- inherent value. What do you feel the market is missing in terms of inappropriate valuing Evotec? And your thoughts on that will be helpful. And then thirdly, do you feel the lack of material manufacturing capability, particularly on the biologic side is potentially limiting the ability to sign new customers either in Innovate or Execute? Obviously, there is a move in the market to be fully integrated. It'd be helpful to understand your thoughts there.

So question number one, Cord will take over on R&D growth dynamic and what's behind there. Question number two on complexity, I think the easy answer here is that it's not complex at all. Evotec is laser-sharp focused on drug discovery and development where the platform that we bring to work is always the same. The only thing that we do is, we sometimes change the business model behind the platform. But the processes behind it are always the same. And that's why for us, it is not a lot of complexity to run that platform. It's not a lot of complexity to even grow this platform because it's a very clearly defined scalable process that is the underlying platform. I understand that from the types of arrangements that we bring to the public, it might appear complex. But that's -- complexity had to be translated into tailor-made because we respect the best business model for our partner and bring the best business model of our partner along the platform. And this can be a risk-shared alliance, this can be a service alliance, this can be BRIDGE alliance, this can be whatsoever, it's tailor-made. And -- but there's no complexity that is not something that is completely under control when it comes to the platform. And on the multi-modality of discovery projects that has to be put to work today, I think you make an excellent point because none of our partners today says, please discover an antibody for us or please discover a small molecule for us or please make us accretive sector or please make a cell therapy. Everyone wants to have the right modality applied for a disease area where people are focused. So being here in the early-stage drug discovery arena in multi-modality oriented, that's what Evotec is, gives us a very, very good starting point and allows us many good discussions to have with our partners, which if they would go to single-modality companies, they could do. And expanding on this multi-modality, especially also into larger molecules and other modalities, is of course, core of our strategy into the next years to come. Back to Cord.

To answer your question on our increased R&D spend. The increased R&D spend goes, in particular, in the platforms that I mentioned. So here, we continue to invest in molecular phenotyping. Here, increased investments into phenotyping of patient populations. We continue to invest in iPSC technologies and platforms that they are -- continue to expand here. We continue to invest in our PanOmics efforts, which means the high-throughput application of Omics technologies through the lab discovery process right from the start since transcriptomics protium is for screening all the way to -- head to lead and lead up programs. And on the basis of these platforms, we have projects, individual drug discovery projects that we run in order to, first of all, demonstrate that these platforms are highly productive but on the other hand, to create assets that are -- can be positioned for more advanced partnerships. The expected return for these investments is relatively simple. What we do expect is our deals where we true up on payments, recoup our investments. And through the upside in terms of research payments, milestones and royalties, we'll get a multiple on our investments back in the future as these collaborations progress.

Are there any other further questions out there? Otherwise I would invite you to...

We have...

Sorry?

Yes, please go ahead.

More questions are more than welcome.

So we have no other questions. Dear speakers, back to you for the conclusion.

Thank you so much. If there are questions arising, please don't hesitate to send an email. You'll find my email on Page 43 on this presentation or send an email to Gabby Hansen, to Katja Werner, we are happy to bring this forward to you. And with this, let me thank you for following Evotec, and I hope to hear you soon, latest at our Q1 report, which will come in May. Thank you so much.

Thank you. Ladies and gentlemen, this concludes our conference call. Thank you all for participating. You may now disconnect.

Perfect. Thank you so much.