Ladies and gentlemen, welcome to the Evotec SE Quarterly Statement Nine Months 2024 Capital Market Briefing Conference Call. I am Sachin, the Chorus Call Operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Volker Braun. Please go ahead.

Thank you, Sachin, and a warm welcome to all of you following our webcast today. We will cover nine months results, and we will provide an update on the progress we have made both operational and also strategic. Before handing over to Christian and Laetitia, it's my duty to point to the disclaimer and the cautionary note regarding forward-looking statements, which you'll find on slide 2 of the deck that we shared today. Moreover, while we reserved sufficient time for you to place all the questions you may have. Please allow me to mention that we call that this call will hardly be longer than 2 hours. And it's now my pleasure to hand over to Christian, who will guide you through today's agenda.

Good morning, good afternoon. Thank you for taking the time to dial in today. Before we go into content, let me tell you how we will approach this call, slightly different from previous earnings calls. This will be an extended capital market briefing, so that Q3 results are only a small part of what I want to cover. I will speak about where Evotec stands today and about the ongoing initiatives and parties to prepare for the future. It's very clear that 2024 has been a pivotal year for Evotec. We have experienced a lot of change and challenges. Now my job is to rebuild the trust and to outline a compelling direction for the future rather than to spend too much time looking backwards. My ambition is to provide clarity, a transparent approach and reliability. Therefore, consider this call as the starting point for taking you along the journey ahead of us. So we have a lot to cover today. But before diving into the details, I want to set the tone. I turn off only for today's presentation, but also for future direction. What can you expect for me during my tenure. It's simply to say, and it takes a lot to execute its uncompromising excellence. If it takes work has never been more crucial, unmet medical needs continue to increase, new treatments are needed to tackle serious diseases. Drug discovery and development costs are constantly on a rise. Our partner Sandoz, our scientists and our technology to develop the future medicines that matter. Through redefining R&D, delivering faster and better outcome and raising the likelihood of success. [Technical Difficulty] Please hold the line. We will continue shortly. Who are all on our call please, accept our apologies. We won't continue with our slight tech issue and wait for the technical to be fixed. We hope for your patience and we will start this as soon as possible again.

Yes. Yes. I am contacting right now to Daniel.

Apologizing for the issues we had. We’ll continue with the conference call.

Thank you, Sachin. It's Volker Braun, again, Head of Investor Relations at Evotec. Please accept our apologies. Since also participants in the call did not have the chance to dial in on time, we will restart the session from the beginning. Again, welcome to the call and we will provide an update on nine months results today and also, obviously, on operational and strategic progress we made. You'll see the disclaimer on Page 2. I have to point to that and the forward-looking statements there and also make you aware that the entire call might not be longer than two hours. And with that, I would say, we jump right into slide 4 with the introduction, and I hand over to Christian.

All right, second attempt. Thank you, Volker, and again good afternoon, also now for those of you who initially have been blocked from entering the call and I hope everyone is now on the call. Thanking you for taking the time. As I mentioned earlier, the purpose of the call is a bit broader than usually. We are running an extended capital market briefing. The Q3 results are only a small part of what I want to cover today. I will speak about where Evotec stands today and about the ongoing initiatives and priorities to prepare for the future. It is clear that 2024 has been a pivotal year for Evotec. We have experienced a lot of change, a lot of challenges. My job is to rebuild the trust and to outline a compelling direction for the future rather than to spend too much time looking backwards. My ambition is to provide clarity, a transparent approach and reliability. Therefore, consider this call as the starting point for taking you along the journey ahead of us. So, a lot to cover today. Before we dive into the details, I would like to set the tone, the tone not only for today's presentation but also for future directions. What can you expect from me during my tenure? It's simply to say, it takes a lot to execute uncompromising excellence. Evotec's work has never been more crucial. With unmet medical needs, they continue to increase. New treatments are needed to tackle serious diseases. Drug discovery and development costs are constantly on a rise. Our partners rely on us our scientists and our technology to develop the future medicines that matter through redefining R&D delivering faster and better outcome and raising the likelihood of success. As scientists by training, I know firsthand that this requires excellence and it cannot be excellent unless it is uncompromising. Scientific excellence has always been at the heart of Evotec. No other R&D biotech company has comparable expertise spanning across therapeutic areas, modalities, technologies. But now, we need to set ourselves up in the best possible way to also deliver with excellence. We'll get there with diligence with a thorough data-driven approach that leaves no stone unturned. We are embarking on a transformation without bias instead we will analyze the business from multiple angles and without preconceptions. Uncompromising excellence is what Evotec will stand for in the future and we will achieve this through unbiased diligence. Together these two principles underpin a lot of what we will also discuss today. It's been just over four months since I became CEO and I want to share some reflections. It has not been an easy year for Evotec but that should not overshadow the exceptional fundamentals of the business, the powerful foundation from which we can evolve further. To me this graph, which you see on the slide, sums it up nicely. Left corner, we have a world-class scientific team. Since joining, I've been consistently impressed by the quality of people at eye level with the leading scientists of the discipline in the world. We have immense scientific strength. I am extremely proud when I hear from our partners time and time again that our people are best-in-class with deep modality expertise and knowledge in therapeutic areas. We're not just bearing partners, but also thought leaders in many fields of research. Right corner, our leading-edge technology platforms. A key ingredient in our formula for success, our roots are in high throughput drug discovery. Over the past 30 years, Evotec has continuously optimized these processes, leading to faster outcome at higher quality and lower risk. And when we add new technologies, we find ways to automize and industrialize them. Our technology leadership underpins a highly cost-effective and successful R&D ecosystem. It's not a coincidence to see customer centricity resting on top of these two core pillars. It's not just fueled by our exceptional scientists and technology. It's part of our DNA. We do not simply do a job for our customers. We want to be successful together with them to develop new drugs. Our business is our partners' business. Together, they form the three dimensions of our scientific excellence. They are the reason for our outstanding reputation in the market, and they will remain at the heart of everything Evotec does even when we evolve and refocus. This exceptional foundation, the excellence of our customers, the excellence our customers see every day is only one side of the equation. Speaking frankly, we're not seeing the results we want to see. While we are making good progress, today's operational update is evidence of that. We need to change the way we run our business. What does this mean in practice? A thorough evaluation of our strategy, our operations, the organizational setup and an honest look at our processes. In other words, our system upgrade is about fostering internal excellence and improving the way we work with diligence without bias. Success here will result in productivity gains and substantially improve operational and financial performance, and it will also pave the way for further growth. In short, we will pair today's scientific excellence with operational excellence to deliver superior and sustainable profitable growth. I want to give you a snapshot of what this looks like. This slide represents our journey to regaining growth momentum and to increase profitability. Reset, review, restart. A lot of activity is already well underway, but our restart won't be until next year. You are familiar with our priority reset initiative towards profitable growth. As I mentioned, we are well on track to deliver the announced €40 million savings even at improved conditions. This is a first step to building a more focused and effective Evotec. The next step is the wide-ranging transformation program that is already in the making. As part of this program, we are reviewing our strategy. We're taking an unbiased look at where we are today and where we need to go. We will leave no stone unturned. I will be very direct with you. It is too early to unveil a new strategy today. Expect this in the first half of 2025. It's crucial we give this review the time and attention it deserves. So let us speak about what this wide-ranging program will cover. Number one, it is Evotec's strategy our business portfolio and priorities going forward. Number two, our operating model, organization and strengthening our enabling functions. Number three, our operations, footprint and processes that guide our workflow; and number four, our culture, the responsibility of leadership, accountability and the way we develop our people. The insights gained from this review will lay the foundation for our new direction of travel, the restart that we will kick off next year. We will see some quick wins short-term while we are embarking on a multiyear program. We're not chasing for some quick fixes with only incremental potential. We will elevate Evotec to where it deserves to be in operational and financial performance. This transformation will strengthen Evotec's growth and profitability simultaneously. Now let me set out what we will cover today and also what we will not cover today. I want to reiterate our messages from the past couples of month that as we make headway with our transformation, we will not be sharing guidance for 2025 today, nor will we present a new strategy. But I can say that we are well on our way to understanding our outlook for next year and we are all fully on track towards a new direction of travel. Turning to our focus today, we will look at the immediate, the short and the midterm. On Q3, we will shortly cover results in more detail. But as a brief intro while we continue to navigate in challenging market conditions, we reiterate our guidance for 2024, we point to a host of successful and very important strategic business expansions, which clearly underscore our leadership in R&D and further improve visibility of our order book for the future. I want to particularly highlight strong progress made on cash management. Next, we will provide an update on the priority reset. The message here is that we have moved fast, achieved a huge amount in short time and are on track to realize rough €40 million of savings across all levers identified. Finally, we will turn to the mid and long-term to our launch of the thorough 360 Review I discussed earlier. So before Laetitia presents nine-month results, please allow me to provide a short update on the most important operational developments in the third quarter. Here I want to draw your attention to three very important new contracts signed in Q3, which complement a stream of great achievements in the year of 2024. Those new contracts add nicely to our order book and they will start contributing more significantly in 2025. The quarter started strong with the expansion of our collaboration with Sandoz. Winning Novo Nordisk as partner for our next-generation cell therapy was likewise an important step ahead as was expanding our successful alliance with BMS in a new disease area. I want to particularly highlight the continued strong performance at Just-Evotec Biologics. Revenues are up 74% versus nine months last year because of our fruitful cooperation with Sandoz and various other partners. Later in the call we will share more insights into the specific measures taken as part of our priority reset and strategic review. Speaking of improved visibility on slide 12, you see that Discovery sales continue to gain momentum. 12-month rolling sales, excluding the exceptional contribution we had from the replaced contract with the CHDI are up by 60% and Q3 sales stand 20% higher than in Q3 2023. We discussed in recent calls that the nature of the contracts have changed. As contracts are more strategic and long term in nature, improved visibility over multiple years is the trade-off for immediate revenues. The contract extension and expansion with Sandoz has resulted in a significant increase of what is already a very healthy order book at Just-Evotec Biologics. Also the structure of the business is set to change over time, as the share of commercial manufacturing will add, an important layer to the growth story of Just-Evotec Biologics over the next couple of years. I will now turn to Laetitia to guide you through the Q3, and the first nine months, as well as sharing insights into the significant progress we made in our project Priority Reset. Laetitia, please.

Thank you, Christian and welcome from my side. And let me now guide you through our nine-month financial results in more detail. Nine months group revenues have reached €575.7 million in line with the same period in 2023, and this is driven by two counterbalanced trends. On shared R&D revenue has declined from €506.1 million last year September to €447 million this year, due to a persisting soft market. The reduction is driven by our Discovery business, where we continue to see a decline in the more fast-turning transactional work. On the other hand, Just-Evotec Biologics continues to grow with €128.7 million revenue versus €74.1 million in prior year. This growth of 74% is strongly driven by the higher order book in the US and helped by the first client projects in Toulouse. The new manufacturing plant in Toulouse, France is expected to be fully operational in Q1 2025, as planned. Our R&D spending has reduced by 15% versus prior year from €48.4 million in H1 2023, €41.1 million in H1 2024, as we focus on platforms that are most relevant for our partners. Adjusted group EBITDA for nine months 2024 reached minus €6 million due to losses in shared R&D of €6.8 million based on soft revenues and a high fixed cost base. Just-Evotec Biologics is above breakeven with a profit of €0.8 million, benefiting from a pickup in revenues and an improved cost baseline. To sum up, we face a challenging nine months driven by our fixed cost base in combination with the slow market demand for our shared R&D segment. And while our first cost-related initiatives have been implemented, their impact is largely offset by the soft revenues. Cost improvements will amplify over the coming months, as further initiatives are implemented. Overall, our core operations are profitable with an adjusted EBITDA of €0.8 million. The current loss is largely driven by our business in Halle and Orth. at €6.8 million. We successfully closed Orth at end of September, signed a divestment agreement for Halle on November 2. So we will see an uplift on reported group EBITDA in Q4, which contributes to our priority reset target. If we look now at the quarterly development, you can see that revenues in shared R&D are still soft in Q3 limiting profitability while Just-Evotec Biologics improved in Q3 to €40.3 million. Overall, gross margin improved from 8.6% in Q2 to 9.8% in Q3 especially, through improved margin in Just-Evotec Biologics from better operational leverage. In shared R&D, we maintained a gross margin of 15% in Q3 despite soft revenues to immediate actions on mostly nonrecurring cost optimization to transition into the recurrent saving phase of our Reset program, which are ramping up since August. Our continued focus on high-impact R&D investment allow us to further reduce our R&D expense to €11.6 million. In total, this resulted in an improved adjusted group EBITDA from minus €8.3 million in Q2 to minus €5.5 million in Q3, especially driven by the improved profitability of Just - Evotec Biologics. In summary while revenues remained soft in Q3 we see selected positive effect with an improved margin for Just - Evotec Biologics and a shared R&D gross margin around 15%. Moving over to our balance sheet. Evotec currently holds liabilities and lease obligation totaling €467 million split across research financing for 40%, a promissory note for 23%, and lease obligations for 34% of the total value. 95% of our financial liabilities carry fixed interest rates with a well-balanced maturity profile. Due to the fixed interest rates, we are currently benefiting from low financing costs secured during the low interest environment, which should persist over the coming years. I want to reiterate that currently there is no active financial covenant. We managed to waive the existing covenant on drawn lines for the period from Q3 2024 to Q3 2025. For the undrawn FCF, the first testing will take place with the result of end of December 2024. In addition we have further undrawn liquidity reserves totaling €325 million across an undrawn project and research financing and the revolving credit facility. Cash flow has seen a positive turn in Q3 with a positive free cash flow of €16.7 million compared to a negative €80 million in Q1 and Q2. Overall, this leads to an increase in liquidity from €299 million in Q2 to €303 million in Q3. The turn in free cash flow was driven by more than €100 million of cash proceeds from the BMS partnership, leading to a positive operating cash flow of €42.6 million. These payments are for a mix of work already performed and work to be performed in the near future, which is as part of our business model and 8% decrease of Q3 CapEx through the ending CapEx cycle for the Just - Evotec Biologics expansion. After per year end, we have received an additional €50 million in cash from factoring of outstanding R&D tax credits that will further strengthen our liquidity balance. In addition we have launched additional measures to strengthen our liquidity balance as part of priority we set, which we will share more in the next chapter. Moving over to our guidance. We want to highlight that we see a clear path towards reaching an adjusted group EBITDA of €15 million to €35 million for the full year 2024. As we start from minus €six million adjusted EBITDA end of September, we expect substantial profit uplift in Q4 from two main dimensions. Revenue is expected to increase in Q4 versus Q3 based on our current order book outlook and also in line with our historical performance. Due to our high fixed cost, the increase in revenue is expected to lead to a significant uplift in profit and also coming from savings from priority reset and further measures are expected to ramp up in Q4 as more and more initiatives are fully implemented. And we'll share again more in the priority reset section. With this said, we confirm our guidance for 2024. We expect group revenues for the full year 2024 to land between €790 million and €820 million. For R&D activities, we are focusing on scalable first-in-class platforms and projects safeguarding sustainable growth through a reduced R&D expenditure of €50 million to €60 million for the full year. In total, our adjusted EBITDA is expected to reach €15 million to €35 million for the full year. Let's continue now with the update on the progress of priority reset. As a recap, we launched the priority reset to address the challenging market development that led to a mismatch between our capacity and revenues impacting our profitability given our high fixed cost base. The priority reset focuses on three pillars to support our profitable growth and we are on track to reach our targets as planned. Portfolio adjustments here covering the exit of our gene therapy business, reduction of our API production capacity focused capital allocation to the most impactful R&D projects and strengthening our successful partnerships. Capacity and external spend reduction including role reduction across our footprint to address overcapacities and our ongoing global purchasing optimization project. Footprint optimization with site exits in OT, Halle, Cologne and Murphy, as well as building closures in Hamburg in Abindden and Goettingen. Based on the recent liquidity developments, we have added a dedicated work stream to strengthen our liquidity position. The measures are on track and already contributed to the uplift of our liquidity in Q3. Further upsides to come over the following quarters. We will now provide you with details on the progress across the individual pillars. Our cost optimization plan is fully on track to deliver the targeted adjusted EBITDA impact of €10 million in H2 and plus €40 million as of 2025 based on the full annual initiative run rates. By now, we already implemented more than 60% of the targeted annualized impact of the €40 million that will be fully visible in the P&L in 2025. And another point to highlight is that, our one-off expenses have reduced to €62 million from €68 million booked end of June, thanks to an initial and ongoing measures to reduce the cost of the implementation of the program. We are looking into additional options to further lower the cost of this implementation. As you have seen from our recent press releases and from Christian's earlier remarks on this call, we have significantly expanded and strengthened our successful partnerships. I would like to highlight three major achievements in particular. First, our collaboration with Sandoz, which is growing to include commercial supply in Toulouse. This move will secure long-term supplies for Sandoz and even has the potential to add more biosimilars to their portfolio. Second, we've entered into an exciting new technology partnership with Novo Nordisk, focusing on advancing next-generation off-the-shelf cell therapy products. This collaboration is designed to support clinical development and ideally future commercialization of these therapies. Finally, we are broadening our partnership with BMS to include molecular glue degraders beyond oncology, opening new therapeutic possibilities in additional fields. These achievements reflect the strength of our partnerships and our commitment to innovation in health care. Our headcount rightsizing is on track and progressing smoothly with no disruption to the business. So far, the process has been completed in four out of the six countries, covering roughly half of our planned reductions. As expected, the social processes are ongoing in France and in Germany. In Germany, we are wrapping up the voluntary phase with 82% of the targeted reductions already identified. Meanwhile, in France, the redeployment phase has now begun. To summarize, we have already implemented around 200 out of the 400 identified role reductions as of end of September. The remaining reduction will mostly take place in Q4 with a smaller portion extended into early Q1 2025. Our global purchasing optimization program is also progressing well and has already achieved annualized savings of exceeding EUR 7 million. The optimization program is based on three core levers: first, renegotiating prices through our global scale. By bundling purchase volumes across countries we are able to negotiate better pricing that leverages our global scale. We are also seeing additional savings by harmonizing prices across regions. Second, harmonizing specifications. We are streamlining efficiencies by reducing the number of suppliers and expanded standardized catalogs with preferred suppliers and products. This approach ensures cost-efficient purchasing throughout the organization. Third, optimizing demand management. For that we've launched a global spend control tower to closely monitor our purchasing demand. Alongside this we are refining how we conduct our purchasing activities to drive even greater internal efficiency. All together these efforts are positioning us well for sustained cost-effective operations across our global footprint. Our footprint optimization efforts are making strong headway with a target to reduce our current shared R&D footprint by 13% through six dedicated initiatives. I'm pleased to share that three of these initiatives have already been completed achieving a third of our targeted reduction. This includes the successful exit from our site in Marcy the closure of building each in Hamburg and Abingdon and the closure of the site at the end of September. Here is the update on the three remaining initiatives. One for the Halle [ph] site divestments we've made significant progress. We successfully signed on November 2 ensuring employment continuity for around 60 employees post sale. The closure is on track for the end of this month. The cluster part building closure in Goettingen along with the transfer of operations to other buildings on site is progressing and should be completed by end of the year. The closure of the Cologne site has been initiated with completion anticipated by Q1 2025. As we transition projects to our Hamburg and Goettingen sites we are encountering slightly extended time lines for this initiative. These steps mark solid progress towards our goal and we remain on track with the remaining initiatives. We have launched a dedicated work stream to improve our liquidity position in Q3. The measures are on track to strengthen our liquidity position in 2024 and beyond. In October, we successfully completed the factoring of our outstanding R&D tax credits, which added an additional €50 million in cash. Additional cash receipts are planned in Q4 and 2025 for example from the repayment of taxes. Our ongoing operational improvement will lead improving margins in Q4 and the following quarters, which will also have a positive effect on our operating cash flow. On top, we'll benefit from a reduced CapEx spend due to the ending CapEx cycle of the Just-Evotec Biologics expansion. In addition, we have limited planned repayments and options for proceeds from financing activities in 2025. To conclude on our update on priority reset, the program shows a strong performance it's on track to deliver the target of €40 million annual savings by end of the year with 60% of the run rate savings already being fully implemented. First savings are visible as of Q3 2024 and will further accelerate during next quarter. And there is more to come. The 360 review is in full swing. During the review, we will continue to implement identified quick wins to further drive improvements further with transition into a restart mid of 2025, focused on activating our new strategy and accelerating the transformation. Christian will now brief you on our strategic review.

Thank you, Laetitia. The reset is on track and I guess you hear that we are pretty happy with the progress we're making. Our strategic review is also in full swing as mentioned before. Today is not the day to speak about the outcome. We'll do that in due course after a period of unbiased and diligent work. However, I would like to take you along the thought process and explain a bit more what you can expect from us over the course of the next month. First of all, why is it now the right moment? It's been 15 years since Evotec defined its back to roots strategy. The theme at that time was to refocus the company on drug discovery and alliances. Since then, Evotec has a truly remarkable growth journey. In 2012, we recalibrated the strategy to seek more innovation. And in 2018 our aspiration of global leadership was added to our strategy. During that period, Evotec grew 10 times. However, the development of profitability did not keep up with the top-line. Margins have come down quite substantially over the past six years. It is therefore now time for a new chapter in Evotec's story, a new chapter in which we focus on growth and profitability. We will achieve this by pairing our outstanding scientific excellence with operational excellence. Let me spend a few words about scientific excellence and the superior business model that underpins it. What makes Evotec so special in the field of drug discovery and development services? Well, our approach is quite different from a classical CO approach. Over the past 10 years, we've created an R&D powerhouse with unparalleled scientific competencies and leading-edge technology platforms. We have invested significantly into developing those technology platforms to a level where they make a true difference to the quality likelihood of success and speed of drug discovery. It is worthwhile noting that our platforms such as PanOmics, IPC, the Molecular Patient database and the AI-supported discovery have been the seed for some of our largest and most successful strategic partnerships with pharma and biotech customers. So firstly, the inner circle. Technology and scientific leadership is at the core of our offering. We will continue to take a leading role in developing state-of-the-art research technology. It will provide us with superior access to growth opportunities in the future. At the other end of the spectrum, the outer ring we are a full service provider for research and development to pharma, biotech, academia and trust. Customers can come to us and buy individual research services such as assays, high-throughput screens and other at a more transactional level. Those services are the essentials of our operational work and we will further enhance our productivity levels. Finally, combining subsets of services into an integrated research project is a superior gap value proposition for many of our customers which you see in the middle ring and Evotec acts as a one-stop shop. For many of our partners, we do not sell research services we help steer the discovery and development of new drugs towards more successful outcome. It will be an integral part of our strategy work to sharpen our profile and our positioning, reviewing the individual elements that contribute to those three rings, deciding on our investment priorities and making it clearer for everyone to understand. The combination of all three value propositions create a unique business model in the market and it provides Evotec with superior access to future growth opportunities. The essentials in the outer ring are building on the continued market of outsourced R&D. This market is expected to grow long-term at high single-digit rates and we are confident that we will get back to those growth rates. As you can see from this chart on the right side, technology-enabled and enhanced this current development will easily outgrow the base CRO business. Both together provide Evotec with superior opportunities in the future. Finally, a few words about the other part of excellence, operational excellence. The future Evotec will perform at a different level than today. We'll spend more effort on driving margin expansion on cash management and delivering higher returns on investments. We'll do that by transforming the way of working at Evotec, all the way from planning to execution. As part of the overall transformation journey, what comes first is working out the new strategy, what will then follow soon thereafter is a review of our operating model and adjusting our organization where needed. Furthermore, we will start building a road map for the transformation of our processes and for further upgrading our operational footprint. Over the course of the next quarters, I'm confident that you will see Evotec making progress along these lines. Progress will progress built on an unbiased approach and built on diligence. Before we turn to questions, I want to reiterate two crucial points. We have a clear direction forward and we're making significant progress. We do not have all answers ready today but we do have an exceptional foundation from which to evolve, deep scientific excellence and a unique business model primed for growth. And most importantly, we know what needs to be done. We're writing a new chapter for Evotec about uncompromised excellence. And now the management, Board and I are looking very much forward to taking your questions. So operator, please start the Q&A session.

Ladies and gentlemen, we’ll now begin the question-and-answer session [Operator Instructions] And we have the first question coming from the line of Charles Weston from RBC Capital Markets. Please go ahead.

Hello. Thanks for taking the questions. Can I start please with some near-term questions. So on Slide 8, you mentioned that we'll get the full strategic update in H1. Can I just ask you to narrow this down? Is that likely to be at the full year results in April or at a separate Capital Markets Day? Should we be expecting this towards the end or the beginning of the half?

Thanks, Charles, and hello. And it will be April.

Great. Thank you. And then in terms of the guidance range you've got something like seven weeks left of the year but your guidance range remains wide both on the top line and EBITDA. You sort of had an illustrative bridge there but can you perhaps provide us some puts and takes? What is likely to get you to the bottom or the top of that range? And where is your sort of strong visibility as we speak now?

Thanks, Charles. I'll hand this over to Laetitia.

So Charles on the landing of the year, what we have already fully explained in the presentation, we have a clear path towards the achievement of the guidance ranges. There are a few things that I would like to highlight for Q4 and the performance expected for Q4 is that first of all, sequential comparison to Q3 is not advisable, as Q3 is the holiday season with a strong impact on revenue generation that quarter. So the comparison with this quarter is, I would say, on a lower base activity from our business pattern. Second for revenue, it's based on signed order book and further short-term revenue pipeline expected to drive this uplift in Q4. And for EBITDA, I think we mentioned profits from the revenue upside in Q4 will of course play a big part of it, plus the ramp-up of the cost savings of the Priority Reset and the further measures that I outlined a bit earlier in the presentation. So as said, accumulation of top line growth based on the order book and the short-term contracts ongoing plus the fifth consequent uplift on EBITDA from this revenue and the exceptional additional reset program that will start to pay off from a cost perspective.

Thank you. So could I reframe what you said by saying that at the bottom-end of the range that short-term revenue order book wouldn't be needed as much and it's based on revenues signed, whereas at the top end of the revenue range you'd need some of that short-term order book to convert and be delivered? Is that fair?

Yes.

Okay. And then just last one for me, before I hop back into the queue. Page 29, again, the illustrative chart showing that the cash position the liquidity position will be higher in Q4 implying net debt will be lower. Could you give us a sense perhaps of a range of net debt numbers that we might expect at the end of the year? And is there any other, milestone or other large cash receipts expected in the fourth quarter?

So for the forecasted net debt leverage end of this year we have set in motion a strong liquidity plan that has been outlined also earlier in the presentation as part of a new pillar of the reset strategy. And I would say that the net debt is expected to reduce significantly until year-end as per current status. We will keep you updated when everything and each initiative will realize and materialize, but there are several optimizations already done. I mentioned the R&D factoring for $50 million that is already confirmed in Q4 in October it's already in our books and more to come. So based on that you need to forecast and plan for a net debt level that will significantly reduce by end of the year.

Thank you very much.

The next question comes from the line of Michael Ryskin from Bank of America. Please go ahead.

Thanks for taking the questions. I have two as well. First, I want to ask a little bit about the more near-term market environment. You spent a lot of time talking about Evotec-specific operational changes and you just discussed your near-term visibility. But if you take a step back and just sort of look at broader Biotech Pharma market conditions a lot of your peers and counterparts have talked about the persistent pressures in the market over the last several quarters. Could you give an update on that as you saw it through 3Q, as you've seen it through the first five weeks of the fourth quarter? What's underlying demand trends? And what's your expectation of that going into 2025? Are you forecasting some recovery and improvement in biotech and pharma spending and outsourcing? That would be helpful.

Thanks Michael. You said you have two questions can you raise the second one as well so we can do it in one time?

Yeah. Sure. I'll ask the second one. Let's kind of tie to the answer to the first one, but I'll throw it upfront as well. The second one is the process the headcount reduction, the site reduction, the cost control that all makes sense given the context of everything that's happened over the last couple of quarters. But how do you balance some of those cost controls and the risk of leading to deeper cuts in performance, meaning this is an industry where you need to continue to invest in new technologies and new capabilities. You highlight a lot of the strengths that Evotec has built up over the years in terms of PanOmics, iPSC. So how do you juggle that and make sure that you're not cutting too deep and not risking hurting some of that technological and scientific edge? Thanks.

Excellent, Michael. And the first one the market aspects will be answered by Cord Dohrmann, and the second one Craig will take a crack.

Good afternoon good morning everybody on the call. So when it comes to market developments, overall we still experience a challenging market environment in particular, of course, the relatively soft biotech market but also restructuring in the pharmaceutical industry. But we also see positive developments. And in particular we see first signs of recovery in the biotech market as the stronger players still continue to invest into their programs, driving them forward through discovery and also through development. And then in the pharmaceutical industry, the uncertainties for restructuring now I think are delivering also gaps in the pipelines in their capabilities and their capacities that need to be filled. And here Evotec is perfectly positioned to help out and fill these gaps of course. But let me step back a little bit, because these broader market sentiments don't really do Evotec justice as we are operating in a number of slightly different markets. And here I just want to shine the light a little bit on our biologics manufacturing business. We have been very active in this area and closed quite a number of partnerships and also extensions, which is driving our business with very strong growth as Laetitia already described. And so I would say even that our biologics manufacturing business belongs to the fastest growing in the industry. So we are very proud of that and believe that the future growth is absolutely possible. The market for the biologics manufacturing continues to look robust to us. The demand seems to be driven by rising interest in biologics as a therapeutic modality and a shift among our clients who increasingly consider the US and Europe over Asia due to the obvious geopolitical uncertainties. Our current pipeline of discussions indicates that there is good demand for our innovative approach of manufacturing and that we will be able to continue to build new partnerships and grow our business in this segment. We also observe a growing interest from pharma in particular for complex and stable biologics that benefit from our perfusion-based manufacturing where we believe to be extremely strong and even a market leader in this space. And we also see continued interest from biotech companies or biotech segment in particular when it comes to companies that want to meet aggressive time lines for IND filings and here get of course our full attention. So we are confident that there's enough opportunities for new partnerships in 2025 and we expect to keep growing this business going forward. Now when it comes to our shared R&D platform this looks slightly different. Especially our development business took a hit through the cyber-attack in 2023. And quite honestly we haven't fully recovered on this yet. So recovery has been a bit slow. However, we have significantly increased our BD efforts in this space and do see clear signs of recovery. So we are optimistic that we will continue on this recovery trajectory and even see an accelerated recovery once biotech funding is coming back. As presented by Laetitia, our Discovery business has seen improvements in terms of sales particularly in Q1 and Q2 of 2024. Comparatively speaking, the sales in Q3 are a bit slower, but this is a pattern we usually observe. This is usually driven by the summer slump essentially in BD efforts where most people also in pharma and biotech on vacation. Nevertheless, the level of sales on Q3 this year is higher than previous years, and we have good reason to believe that Q4 sales will be clearly above Q4 -- Q3 sales of this year. This will pick up. So in summary, regarding the market, we see a robust or even strong demand in biologics manufacturing business. We see more measured investments into biotechs that have slowed demand on our shared R&D platform, but this is still alive. And the stronger biotech players, like I said, keep investing into the space, and we see a pickup in -- an overall pickup in demand. The new discovery efforts in biotechs have slowed, but the demand, especially on the pharma side, keeps -- is still robust, we believe. And you can see this as evidenced by our deals we struck during the course of the year, in particular, but also more recently with Bayer, the extension with EMS and Novo as well as Pfizer. So pharma customers are increasingly important to us, as you can see also from this development. So overall, once again, a challenging market environment, but business overall is picking up, and we are quite optimistic for 2024.

Thanks, Ken, for the comprehensive answer. This is obviously a question that we get a lot, and I'm also keen to look into what's happening in the next two quarters. But let's come to the other question on the operational.

So, to your question about the balance, and it's a very good question, the balance between the impact of reset and reduction in roles and capacity, while retaining our need and our edge in technology, you're absolutely right to raise the question, but we feel that this is exactly the balance that we're striking. So what you've seen from the presentation is that the reset is very much underway. There are impacts on roles and headcount. There's also impact on physical capacity. And we're making those adjustments and reductions, particularly in the shared R&D segment for the reasons that Claude has already described in terms of the market softness. And that's a capacity adjustment. The very vast majority of our capabilities skills, knowledge and experience we are retaining through this reduction through this reset, but the capacity reduction is well underway. In addition, we are maintaining our guidance in terms of R&D. Our guidance for the R&D is between $50 million and $60 million in 2024, and we're retaining that guidance. And that's really the investment that we're making into differentiated technologies and technologies that we can use to then build further strategic partnerships and differentiation and competitive edge going forward. And you've seen, I think, also in the slides that Christian presented that the technology investments are very much at the center of our rings that were presented on Page 33. So with this, I hope I can reassure you that while we're doing a capacity readjustment in shared R&D, we're continuing to invest quite significantly substantially in internal R&D, in technologies and platforms, which we expect and invest in to increase our ability to land future strategic partnerships looking forward.

Thanks, Craig, and back to the operator.

The next question comes from the line of Christian Ehmann from Warburg Research. Please go ahead.

Hello, everyone, and thanks for taking my questions. I have three at the moment. So could you please clarify a bit the order book composition you have at the moment for the J.POD? I know you showed us the above €1 billion in sales. Can you clarify how long this might last for either one of the plants? And how, let's say, concentrated the order book is to large customers, and how many large customers you have gained smaller customers you have gained in the past? The second question is a bit in regard to your review process. So I know you don't want to spoil us at the moment or give us spoilers. But to me it sounded a little bit like the old business model of Evotec is up for an overhaul and maybe even the pipeline you have been building up in the past of around 140 assets is actually could see a net reduction in the size you might be able to clarify that for me? And the third thing is on slide 12. So the order book for the Discovery part looks a bit like a normalization. You could please remind us what the outliers were in Q2 and Q3 which shows a significant uptick in order book signing? Thank you.

Okay. Christian, thank you. I'll try to answer all three in a row and then maybe others chip in. But the order book composition when it comes to just-Evotec Biologics obviously keep in mind still Biologics is predominantly a discovery and development platform today. So we don't have commercial manufacturing. That's important to know and to keep in mind also when you look at the revenue numbers that you see. This is excluding commercial manufacturing and it will remain for quite a while. That said obviously the order book, there is some pre-booking of capacity with Sandoz, where we're not sharing details for obvious reasons, but it is a significant part which then, of course, goes more into the longer-term future because the commercial manufacturing will not happen in 2025. So I hope it clarifies a little bit that there is a quite significant chunk related to capacity for commercial manufacturing in the long run. But today, the revenues is exclusively discovery and development. When it comes to the business model overhaul, yeah, you probably expect my answer. I'm not sort of stating the opposite of what I stated an hour ago that, I will talk about the strategy at this point in time. But you should not imply that we're dumping the pipeline, or that we're doing anything else reducing the pipeline at this point in time. It's a healthy pipeline we have. We believe that there are good assets. And of course, it will be part of the review, when it comes to parties, when it comes to the pockets of value creation in the future how much effort we will put into that going forward. But you shouldn't imply that this is sort of not on our radar anymore just, because I haven't shown a pipeline chart this time. I also know that, in the past, we've typically shown those pipeline charts and then most questions were about what's happening with the rest of the business we've talked about the pipeline. So please don't imply that this is out. It will be part of our revenue. And then finally on the Discovery order book, I think we have been Astex somewhere. We labeled CHDI and that should have been in the second or second quarter Q2.

So maybe just one addition on the pipeline status very brief. We believe the pipeline is in good shape as of today. It's actually broadening deepening and advancing. And once again key partnership that we presented today with BMS, Novo, Pfizer and Bayer all will contribute to growing this pipeline of co-owned drug product opportunities. So once again, overall, I think that strategy is very much alive and intact as of today. And yes we are optimistic that we can carry this forward.

I hope that clarifies, Christian.

And then one follow-up, if I may. Could one imply or conclude from these statements or the let's say the prominence the big names have in your presentation that you are having a larger revenue share from the big customers going forward, as you emphasisly [ph] talked to us about the long-term contracts, you are signing right now?

Yes. We've been pivoting towards that anyway. And I think that was the message last time. When you look at the Discovery order book, the balance has shifted a bit to larger customer, more integrated longer-term deals. That's certainly, true. Q – Christian Ehmann: Could you quantify the average contract length compared to previous years?

No, we're not looking at this split, Christian. Q – Christian Ehmann: Okay. Thank you very much.

The next question comes from the line of Benjamin Jackson from Jefferies. Please go ahead. Q – Benjamin Jackson: Hi, there guys. Thank you for the question. Just two, if I may. Starting with one that hopefully we can get some kind of color around. But when we're thinking about 2025 and beyond and I know that there's still a lot to go on with strategic reviews and still a lot being discussed. But how should we be thinking about 2025, from here? And perhaps, if you could give a little bit of color around what you think is within assumptions or within requirements to meet where people's thinking currently is. Any kind of color about trajectory in there would be really useful for us. And then secondly, just on Sandoz into next year, is there any change of thinking around the importance of Sandoz, particularly around potential opt-ins potential SPODs? Has any of the recent deals changed any of this? And perhaps, whether you have that as something that is more probable than not to occur and how much of that goes into your thinking going ahead? Thank you,

Benjamin, thanks for the question. And maybe starting with the first one. It's obvious that 2025 and beyond are almost two different questions, right? It's 2025 and then beyond. The big question that everyone has in the market is, when is actually the market going to pick up again? I think you hear that also from other players particularly, when it comes to the funding in biotech, when it comes to restructuring of pharma budgets, when it comes to BIOSECURE Act there's a lot of variables right now, that are not answered at least one variable is now out which is the election in the US. But there's still quite some uncertainty about these macro factors that will influence the market development, which is as you've seen this year 2024, pretty crucial for our business, because a swing up a few percentage points in revenue growth will immediately and quite significantly improve our profit line. So, that's the one thing. And that's why we at this point in time, cautious making statements about 2025. Then, as you've heard from the chiefs here, our project is in good shape. The smaller chunk of the contribution is coming this year, the larger so the full run rate you will see next year in total €40 million. And when it then comes to all the other things that we've been discussing today, and in previous meetings, so be it the transformation that I just mentioned the pipeline that Cord was alluding to, but also the commercial manufacturing the collaboration we have with Sandoz and the ramp-up of Just obviously, when you think beyond 2025, there is a good reason to believe that particularly in 2026, a lot of these pieces will come together nicely 2026 and 2027, to help us lift the performance even beyond what we might be thinking of 2025. So I'm actually the midterm very confident about the development of this business. But short term, it would not be reasonable to give you something on a market outlook where everyone doesn't have an answer to that, at this point in time. And then with regard to Sandoz, I would like to ask you maybe to specify the question a little bit because I wasn't sure why you were alluding to the iPOD on Sandoz.

Just around the potential SPOD opt-in for Sandoz, whether that's still a consideration for 2025? Or is that not something that's as much spoken about as much?

Okay. All right. But ultimately that's their decision, right? And I would recommend to place that question in a Sandoz analyst call.

Yes. Fair enough. Thank you.

The next question comes from the line of Joseph Hedden from Rx Securities. Please go ahead.

Good afternoon. Thanks for taking my questions. I've got three. Firstly, it's clear that you expect a strong performance in Q4 to get into the guidance range. I'm just wondering where proportionally you're expecting it to come from in terms of uptick on just and shared R&D segments is one outperforming the other there in terms of growth? Secondly, on your EBITDA bridge, just looking clearly you expect a lot of that to come from the revenue improvement. And then you talk about the cost savings and priority reset but digging in a bit more what kind of gross margin improvement are you expecting in Q4 if any? And then lastly on CapEx, CapEx is down as you've completed the J.POD in Toulouse. Is there any significant additional capacity being added next year? Or can we think of it falling to what we'd consider maintenance levels for the new footprint? Thank you.

Okay. I'll start and Laetitia then continue to finish it. I think CapEx wise as she said we're coming to the end of the investment cycle in Toulouse. It's going to be fully operational next year but we're expecting this to move into more maintenance CapEx because the plan is there. And the main investments have been done. On Q4, it's fair to say on the revenue line, when you just look at the development Q1, Q2, Q3, we also expect a fairly robust revenue development of Evotec Biologics again. So there shall be a good contribution coming from this part of the business and then maybe on the EBITDA bridge. I know that Laetitia you already spent the previous question a few points on the bridge but is there anything else you want to add?

Yes. Joe, what I can add a bit of color around what's the contribution coming from the revenue in Q4. I would say we will grow further in both shared R&D and in Just-Biologics and to achieve the guidance we expect the growth coming half from shared R&D and half from just Evotec Biologics in terms of absolute amount directionally. And yes, as I said earlier, it will come from the additional revenues we have coming from shared R&D as you know we have a fairly fixed cost base. So a large part of this extra revenue will contribute largely directly to the EBITDA as additional very high fall-through, let's say from revenue to EBITDA. And then the project reset, we've spoke about €10 million of additional already savings this year. We have already achieved part of it at end of Q3. We expect acceleration in Q4 to get to this €10 million is also a high element to take into consideration. And of course, next to that we are into motion into really improving any operational ways of working that also next to those big key projects and areas are improving our cost base. So coming from revenue both shared R&D and Just-Biologics with a very strong fall-through into EBITDA for shared R&D and our project reset and all the optimization and excellence in operations that we are driving at the moment will generate and help to make this Q4 strong quarter to get the guidance.

Thanks, Joseph for your question.

Thank you very much.

Back to the operator.

We have a follow-up question coming from Charles Weston from RBC Capital Markets. Please go ahead.

Hello. Thanks for taking a few more. Can we dig in please a little bit on the dynamics around the Discovery versus transactional services? So in Q3 specifically was Discovery up and transactional down or were they both down a little bit? Can you give us a bit more color on the performance of the two different bits from a revenue rather than a closed sales perspective?

Charles you mentioned a few points. Are there further questions?

Yes. My second is following up on Joe's question around maintenance CapEx what would you say is the right level for maintenance CapEx at the moment? And then lastly is more of haven’t ask please. You had sort of four updates between April and November but then there doesn't tend to be an update from early November till April. I was wondering whether it would be possible to have some, sort of, update particularly on Q4 performance sometime before your full year results please?

Thanks, Charles for the question. And at least we are thinking about this. So this is not answering your question, but we're thinking about this. And we'll get back to that at a later point -- on the other two topics Discovery versus transactional a very quick one from Cord. And then maybe the maintenance CapEx, I'll direct to Craig if that's possible. Cord?

Regarding the dynamics between Discovery and transactional which is a good question, but not easy to answer. It's a bit of a mixed picture. So generally Discovery is a little down. And as we alluded to or as we remarked earlier with the market sentiment especially the soft biotech market there are limited new company starts fewer companies have started and fewer new projects are coming into the pipeline than in the past. And then on the transactional side certain areas of the transactional side also because of this remain a little weak versus other areas that are picking up. And on a positive note essentially when we look at the ADME-tox DMPK profiling business which is clearly up for us is also indicating that markets are coming back here in these areas. So I think all I can say about that because that's an exact split we don't really have anyhow and but I hope that helps.

Okay. On maintenance

On maintenance CapEx I'm not sure if your question Charles is about maintenance CapEx in Just-Evotec Biologics or maintenance CapEx and shared R&D or combined? So let me just try and touch on a few key themes. So in terms of Just-Evotec Biologics then of course maintenance CapEx is still a very capital-intensive industry. Biologics manufacturing is capital intensive and continuous biologics manufacturing is also quite heavy in CapEx. But of course as we've already said the main construction of the J.POD 1 and J.POD 2 now are basically complete. So maintenance CapEx and Just-Evotec Biologics is probably in the tens of millions annually just to maintain our technology edge and our investment edge to maintain the very differentiated continuous biologics manufacturing infrastructure. And then in terms of the shared R&D segment most of the capital spending in shared R&D is also for equipment and enhancement in technologies and maintaining our very high-end technology edge in methods of detection in biology technology because biology is a very, very capital-intensive industry. And so most of the capital that we invest in shared R&D is also for technology edge and advantage.

So is there sort of a group number that if you weren't investing a lot in expanding CapEx what would be the sort of typical annual group CapEx that you need?

So let me bring a bit of color at group level. This year as you know, we have intensive investment on Just-Biologics with our new site in Toulouse which is a significant share of our investment for Just-Biologics. On shared R&D, we are more in a maintenance mode. We have already acquired in the past years most of our assets. So we are really much more into maintenance than in building further investment. And as you have seen also, as part of our liquidity optimization, at the moment, we are really, really focusing on CapEx that brings extra value to the company. So investment CapEx versus maintenance CapEx that we are with the support of procurement and the operations, optimizing our efficiency on investing in this area. So still of course doing everything we have to from a maintenance perspective, but heavily shifting investments to the asset that brings the value of the company for the future years. So, if you look at the end of September, about two-thirds of our CapEx are directly driven for future growth, enabling future growth and innovation at company level.

Thank you very much.

[Operator Instructions] There are no more questions at this time. I would now like to return the conference back over to Dr. Christian Wojczewski for any closing remarks.

All right. Thank you, Sachin and also and thanks to everyone on the call. It's been a pleasure having you today. As we said, there is definitely a fixed date in the calendar or at least a fixed time window in April where we will go in much more detail and if there is an opportunity here for us to share some stuff earlier, we'll let you know. But for now, I'd like to close the call for today and thank you all for participation. Thank you. Have a good day.

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