Ladies and gentlemen, welcome to the Evotec SE Half Year Report 2024 Conference Call. 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. 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, sir.

Thank you, Udith, and good day, good morning to all of you attending our H1 2024 results call today. I trust that you all have seen our press release this morning and that you have had a chance to take a look into the report already which we will discuss in more detail in the coming hours. Before we go there, it's my obligation to make you aware of the cautionary language as outlined on Page 2. But now I would like to hand over to Christian Wojczewski, our CEO, to guide you through the deck that we have prepared for today's call. And please, Christian, the floor is yours.

Thank you, Volker, and welcome to everyone on the call. Before I share the agenda with you, I would like to introduce you to the participants in today's call. So here with me in the room, we've got Laetitia Rouxel, our CFO; we've got Craig Johnstone, COO; Cord Dohrmann, CSO; Matthias Evers, CBO on the call as well as Aurelie Dalbiez, CPO. Special thanks also to my colleagues from the Management Board. They did a tremendous job onboarding me during my first month at Evotec. Laetitia and I will guide you through the slides. And as Udith mentioned, at the end of our presentation, we will have a dedicated Q&A session. So the entire team here is available to answer your questions. We will cover three topics in this call, the business revenue, including the first half-year results, followed by an operational update. Finally, a follow-up on our priority reset, which was announced earlier this year and which will include further comments on the renewed outlook. Let me start the business update with a few words about what I found at Evotec just after a few weeks in the business. Our company over the past years has evolved into a true R&D powerhouse. Three elements in particular make Evotec unique. Firstly, our people. The dedication of our world-class talent base is simply impressive. With almost 5,000 highly experienced employees, we have a strong scientific, innovative, and creative capacity. Secondly, the quality of our leading-edge technologies and platforms. They allow us to bring R&D to the next performance level, and we go beyond the obvious. Thirdly, the deep partnerships with top pharma and biotech. Evotec has year-over-year demonstrated outstanding quality of services to our partners, resulting in high levels of repeat business, long-term and integrated deals, and a spotless reputation of quality and innovation in the market. Evotec is well positioned in a structural growth market. However, this year, we're facing a challenging market environment, and we will have to better leverage our strengths in the future. I will go into more details during this presentation. Let me first highlight the results for the first six months of 2024, which we have published today. In the first half of 2024, our Group revenues increased by 2% to EUR390.8 million versus the comparable period in 2023, which were EUR383.8 million. Total shared R&D revenues decreased by 7% to 302.4 million, while revenues of Just - Evotec Biologics increased by 50% to EUR88.5 million. Adjusted EBITDA for the first six months was minus 0.5% compared to EUR33.9 million in the first half of last year. Laetitia will share more details later on. I'd like to guide you through the key underlying trends that have led to Evotec falling short of revenue and profit expectations. Most notably, the market environment has given us no new signals of recovery to happen still within 2024, as we hoped for. We expect a broader recovery now earliest in 2025. We continue to face stagnation of early R&D spending in biotech while geopolitical factors and slow economic growth are leading to more cautious decision-making in the pharmaceuticals industry. The sales order book in our Discovery business, a core pillar of shared R&D, continues to grow at a very healthy level. Q2 2024 was, in fact, one of the best quarters in terms of closed sales. Our 2024 revenues, however, do not follow the same upward trend, mainly for two reasons. Firstly, within shared R&D, the portion of integrated multiyear contracts has increased. The multiyear contracts are generally positive. They provide us with a stronger order book for the years to come. However, we like fast turning orders, especially in our transactional businesses, notably development and fire protection, but also fast turning work in Discovery. Secondly, especially with biotech, we experienced a long time spent between closing the deal and scaling up the work more broadly. Consequently, the conversion of orders to bills, our revenue phasing, and mix have changed. Currently, we are now working on adjusting our workforce capacity to the new market environment while also maximizing commercial efforts to drive short-term revenues. As a result, the mismatch of our revenue profile with capacities has severely impacted our short-term profitability. Moreover, Evotec has a too high fixed cost base in relation to the current revenue profile. We identified areas where we can adjust capacity and improve. And this holds true for our operations, but also for other areas like IT. While costs for the recovery activities after our cyber-attack are gradually in decline, we are making sizable investments into our tech stack to be more agile in the future. As mentioned before, our Just - Evotec business has grown strongly in the first half of 2024. That said, costs related to the ramp-up of our new J.POD facility in Toulouse will be higher than initially planned, while we also make important learnings as we ramp-up this new and highly competitive and compelling technology platform. We've taken decisions to bring people on board in an expedited process in order to deliver on our commitments with our customers. Furthermore, in the first half of 2024, we faced non-planned one-off costs. In light of the continued challenging market environment and the fixed cost situation, we updated our guidance last week. Further explanations later during this presentation. Earlier this year, the management board took immediate action to start course correcting the development. We announced a reset of priorities earlier this year towards profitable growth, and this program is gaining further momentum. We aim to deliver EUR40 million of gross savings fully effective in 2025. I'm now handing over to Laetitia for the financials.

Thank you, Christian, and welcome from my side. Let me now guide you through our H1 financial results in more detail. In H1 '24, we achieved EUR390.8 million revenue, which represents a slight 2% increase compared to the same period in 2023. The revenue increase is driven by the continued growth of Just - Evotec Biologics offsetting the lower revenue in shared R&D. Just - Evotec Biologics reached half-year revenue of EUR88.5 million compared to EUR59 million in the previous year. This growth of 50% was 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. Our shared R&D business declined by 7% from EUR324.8 million in H1 '23 to EUR302.4 million in 2024 due really to the persisting challenges in the market environment. We remain committed to investing in the future with the R&D expenses of EUR29.3 million in H1. However, we reduce spending from EUR30.9 million in H1 last year to EUR29.3 million H1 this year, representing a 5% decrease as we focus on platforms that are best aligned with the strategic fit and relevance for our partners. Adjusted group EBITDA for H1 '24 is close to breakeven at minus EUR0.5 million, driven by a persisting mismatch of revenues and costs in the shared R&D segment as well as higher costs related to the ramp-up of the new J.POD in Toulouse, France within the Just - Evotec Biologics segments. To sum up, we faced a challenging H1, driven by our high fixed cost base in combination with the slow market demand for our shared R&D segment, which we are addressing through our priority reset over the next quarters. An additional contribution to the low H1 EBITDA comes from our unprofitable business in Halle, focusing on small-scale commercial manufacturing and Orth gene therapy with a total H1 loss of EUR4.1 million. Businesses are no longer considered part of our core business, and we have launched initiatives to separate from our business in Halle and wind down our operations in Orth. Without these business areas, our core operations generated an adjusted EBITDA of EUR3.6 million in H1 '24. As we separate the business in Halle and Orth, we will see an uplift of our reported group EBITDA. This effect should become visible towards the end of this year and in 2025. If we look now at the quarterly development of our financials from Q1 to Q2, 2024, we see another challenging quarter as anticipated. Revenue in Q2 is lower than the previous quarter in both shared R&D and Just - Evotec Biologics. However, driven by different reasons. While the shared R&D segment faced another quarter with a particularly strong, sorry, with a challenging market environment, Just - Evotec Biologics is comparing revenue to a particularly strong base in Q1 last year. And this is due to the completion of selected work packages. Overall, the seasonality of revenues in the ramp-up phase has an element of volatility through revenues are strongly increasing over time, as Christian will detail in the operational update. On the other hand, the gross margin in shared R&D has improved from 12.8% to 15.4% despite the lower revenue owed to immediate actions on mostly nonrecurring cost optimization to transition into the recurring savings phase of our reset program starting as of July. Just - Evotec Biologics has seen a turn from a gross margin of 27.9% in Q1 to minus 19.3% in Q2 due to lower revenue and higher costs from the ongoing capacity ramp-up, especially in Toulouse. While we are reducing quarterly volatility as we grow further and despite this result for H1 '24, our goal is still breakeven over the full year. The R&D expenditure has reduced from EUR16.1 million in Q1 to EUR13 million in Q2 as a result of our focus on selected R&D platforms that are best aligned with the strategic focus of our partners. To sum up, we will experience, while we experienced another challenging quarter with lower revenues, we see select positive effects. On the other hand, Just - Evotec Biologics faced a higher cost base due to capacity ramp-up to support the strong order book. We are managing our balance sheet cautiously to offer flexibility in our strategic execution. While total assets decreased to EUR1,998.9 million versus EUR2,252.5 million end of '23, mainly due to a decline in cash and cash equivalents, our equity ratio remained stable at around 50%. Our cash flows were impacted in H1 by the repayment of loans of EUR110 million, a challenging performance and temporary unfavorable change in working capital. This cash flow combined with our reduced LTM EBITDA has resulted in an increase in our net debt leverage ratio to 4.3. While our net debt leverage has increased over the past period, we expect to meet the financial covenants in the period going forward based on the improving operational profitability and cash outflows together with additional planned optimization measures. We will provide further detail in our next call. In addition, we have strengthened the resilience of our balance sheet through subsequent events post H1. In July, we successfully completed a revolving credit facility of EUR250 million, which replaced the majority of our old debt structure. Cumulative proceeds from BMS, Neuro, and Oncology in July and August exceeding $100 million are contributing to supporting the improvement of our operating cash flow. I will now hand back to Christian, who will guide you through our operational update.

Thank you, Laetitia. I will start with recent developments in shared R&D and then speak about Just - Evotec Biologics. As started earlier, our Discovery business outside the BMS partnerships had an exceptional quarter in the second quarter this year when it comes to close sales. As a reminder, Discovery is where our core offerings in shared R&D sit and it reflects roughly 70% to 80% of shared R&D. This is a great achievement and speaks to the differentiated value proposition Evotec has in an overall weaker market environment. As explained, we see an increasing share of multiyear deals and slower ramp-up from project launch to broad use of Evotec capabilities and consequently the utilization of our workforce. Hence, sales translate into revenues over the remainder of 2024, but also into 2025 and beyond. In short, our mix is changing further towards strategic integrated deals, actually spreading out sales over a longer period of time in terms of revenues. Hence, we see both a positive momentum while continuing to face the challenge of competition and slowdown of growth in the more fast-turning and transactional parts of our business. Notably, let us call out development. While our integrated offerings are differentiating, especially our highly sought-after INDiGO solution, we see a challenge to deliver short-term revenues. We started the turnaround program and see increasing proposal momentum, but it is too early to declare success and it will largely need tailwinds for market recovery in 2025 to move back to revenue growth in development for this part of the business. Evotec continues to be a highly attractive partner for pharma and biotech companies as well as foundations such as CHDI and Crohn's & Colitis Foundation. This is based on our fully integrated capabilities, but in particular also on different drug discovery and development platforms, which come hand-in-hand with a highly skilled and experienced workforce. As you can see on this page, we have signed various new partnerships with foundations, biotechs, but also pharma companies in the first half of this year. Regarding foundations, we are extremely proud that we've been able to extend our collaboration with CHDI and Huntington disease, which is not only very significant in scope, but it's our longest-standing collaboration closing in on 20 years of continuous collaboration by 2026. We're also very proud to partner with the Crohn's & Colitis Foundation, which is yet another endorsement of Evotec's capabilities. Furthermore, we're creating additional partnerships with Pfizer and Bayer in the field of metabolic and infectious disease, as well as cardiovascular disease respectively. The fact that pharma companies tend to build multiple partnerships with Evotec indicates that we deliver high-quality work in line with the expectations of our partners. An excellent example, sorry, an excellent example are our BMS collaboration, which continue to deliver and I will talk about this in a bit more detail in the following two slides. On Page 17, you can see the full history of our BMS neuro collaboration, which is based on our iPSC platform. It started back in December 2016, when we signed the partnership on the basis of a $45 million upfront payment. The collaboration was continuously expanded during the first six years as evidenced by many success-based payments. Last year, we signed an extension and expansion agreement of the partnership, including an upfront payment and licensing payment totaling $90 million. 2024 has proven to be a very successful and highly productive year again with the announcement of three key scientific achievements, resulting in payments of $70 million in total. The collaboration already delivered the first drug candidate into the clinic. And although we can't discuss details of scientific achievements, they're clearly related to expanding and advancing drug discovery programs. The following slide gives you a perspective of our BMS oncology partnership. This partnership was originally established back in 2018 as a key alliance in the field of targeted protein degradation with a focus on oncology. The initial agreement came with an upfront payment of $65 million and made a lot of progress right from the start with undisclosed development extension payments. The productivity of this collaboration can best be judged by the fact that we were able to extend and expand the collaboration in 2022, triggering a $200 million upfront payment and up to $5 billion in potential success-based payments. Since then, we've made significant progress in continuously expanding the pipeline, which is exemplified by $75 million in success-based payments in 2023 and has recently announced another $75 million in payments in 2024 up to now. As previously announced, we are reporting Just - Evotec Biologics as a separate segment to better reflect the significant progress this business has made and its growing contribution to Evotec's overall profile. I recently had the opportunity to visit the Just - Evotec Biologics facilities in Seattle, Redmond, and Toulouse and I was really impressed by what our colleagues have built over the past few years. The innovations coming out of Just - Evotec, from our industry-leading cell lines to our novel continuous manufacturing technology, hold the potential of a paradigm shift in biologics development and manufacturing. These advancements position us in a growing modality, and I'm confident they will play a key role in shaping the future of the industry. Our value proposition at Just - Evotec Biologics ranges from technology partnerships and molecular optimization to commercial manufacturing. We are witnessing progress at every step. Technology partnerships have emerged as a new layer. We are now being selected by the US Department of Defense for its manufacturing optimization program. This is a significant achievement as we will be further developing our state-of-the-art ultra-rapid and cost-efficient biotherapeutics manufacturing platform, which includes the seamless integration of accelerated monoclonal biologics drug development. This partnership underscores our commitment to enhancing the US government's ability to respond swiftly to emergencies involving biologics. At the molecular optimization level, we've also secured various partnerships, amongst others with the German Cancer Research Center and the University of Oxford. In the IND-enabling phase, we've established a new partnership with a leading innovative pharmaceutical company alongside additional collaborations and we are now seeing substantial resupplies due to our successful work over the past few years. Moreover, our late-stage programs are making remarkable progress positioning Just - Evotec Biologics technology for entry into the commercial space. Let me also provide you with an update on our Sandoz Biosimilar partnership. Since closing this partnership in 2023, we've seen good scientific and strategic progress. We remain fully committed to our shared goal of making biosimilars more affordable. A few weeks ago, Just - Evotec Biologics expanded its partnership with Sandoz. This expanded collaboration not only adds more biosimilars to Sandoz's development pipeline but also strengthens our commitment to long-term supply security for Sandoz. Our newly built J.POD manufacturing facility in Toulouse will play a key role in this partnership, reserving significant commercial manufacturing capacity to ensure a reliable supply for those patients. As I highlighted at the beginning of this section, Just - Evotec Biologics is well positioned to benefit from the growing biologics field. We are recognized as a leader not only in antibody development but also in the advancement of bi and multi-specific molecules and other innovative molecule types. Our strategic advantage is further strengthened by our facilities in both the US and Europe, including our new site in Toulouse coupled with our focus on commercial excellence.

Ladies and gentlemen, please hold the line. The conference will resume shortly. Thank you.

US and Europe, including our new site in Toulouse, coupled with our focus on commercial excellence. This positioning has resulted in substantial growth and our sales order book now significantly exceeding EUR1 billion, including commercial supply commitments. Based on our growing order book, our quarterly and last 12-month revenues are steadily increasing. The quarterly fluctuations are mainly due to batch production volumes. We're on track to close this year with record revenue. It's important to note that while we are experiencing substantial growth, the majority of our revenue still comes from process development, though clinical is becoming increasingly significant and we have a clear pathway into commercial manufacturing. Let me now summarize the development of our two business segments, as outlined before. For shared R&D, Q2 is overshadowed by the mismatch of revenues and capacities. This is particularly true for our more transactional and fast-turning offerings. Strategically, we've progressed on focusing shared R&D and started identifying non-core activities, gene therapy in Orth being a notable example. At the same time, we were able to close further multiyear strategic collaborations. This speaks to the ability of Evotec to provide highly differentiated offerings in a difficult marketplace. The Just - Evotec Biologics portfolio is expanding and we have signed a very important extension of our partnership with Sandoz, building on momentum and initial successes. It continues to add biosimilars to the pipeline and even more importantly, driving commitment of Sandoz to leveraging J.POD technology for the commercial manufacturing way into the 2030s. Overall, we are making progress on resetting the business, but combining the effects of delayed market recovery in 2024, our capacity adjustments being fully implemented only in early 2025, and learnings as we ramp up Just - Evotec Biologics, it all led us to revise guidance for 2024. Let me summarize the key drivers for that. In shared R&D, and as I said before, we see a positive trend in the order book for Discovery. However, a share of our planned revenue is moving beyond 2024. This combined with a persistent weakness in fast-turning business across our offerings accounts for EUR50 million to EUR55 million of reduced EBITDA impact in the current year compared to previous guidance. Just - Evotec Biologics accounts for about EUR15 million of the adjusted guidance related to higher fixed costs, as explained earlier in this call. We're expanding capacity rapidly in light of the expanded closed sales, and we built up leverage as we go. A smaller part is related to assets we've identified as non-core business, which we will separate towards the end of the year as presented in the financial section. Given these major changes to our business, we have revised our guidance for 2024 last week. We expect group revenues for the full year 2024 to land between EUR790 million and EUR820 million. For R&D activities, we're focusing on scalable first-in-class platforms and projects, safeguarding sustainable growth through a reduced R&D expenditure of EUR50 million to EUR60 million for the full year. In total, our adjusted EBITDA is now expected to reach EUR15 million to EUR35 million for the full year. We announced a reset of priorities earlier this year. We are progressing well on the execution of three pillars towards sustainable, profitable growth: portfolio adjustments, capacity improvement and external spend as well as footprint optimization. Let me share further details. On the portfolio adjustments, we are progressing well on the closure of our gene therapy business in Orth. Furthermore, we scaled back our API development capacity. In R&D, our focus on first-in-class platforms shows the first visible reduction of costs. In addition, we're focusing our business development activities to maximize our sales order book for future growth. On our capacity and external spend optimization, we're making good progress as well. We've recently concluded the reduction in force in the US and UK totaling around 100 roles. In Germany, Italy and France, the social processes are ongoing. In total, we are targeting a reduction of around 400 roles. Our global purchasing optimization program is progressing, and we have started renegotiating with suppliers. Finally, on footprint, we're progressing according to plan. We've completed the exit of our chemical activities in Marcy, France, and are progressing with the ongoing closure processes in Orth as well as our activities in Halle. We've also completed selected facility closures and relocations in Hamburg and Abingdon. This is reducing our fixed costs at the respective sites, and we can leverage our existing capacity more efficiently. Based on the already implemented initiatives and our implementation plan, we expect EUR10 million of EBITDA uplift in the second half of this year. This impact will come largely from our external spend optimization and reduction in force as well as smaller savings from the Orth closure. The full-year impact is expected to exceed EUR40 million and will be reached in 2025. The headcount review has identified a reduction potential of 400 roles across our global footprint with a sizable share being completed in 2024. To achieve the annual savings, we expect one-off expenses of EUR68 million largely driven by the costs associated with a reduction in force of the 400 roles and our footprint optimization. Now let me transition to our first thoughts on the more longer-term development. Evotec has been on a remarkable growth journey for the past 10 years. We've grown the company from EUR90 million to around EUR800 million in revenues. 2024 has been a particularly challenging year, both in terms of growth and profitability. We're now focusing on preparing ourselves for the next stage in the company's growth journey. In order to make Evotec stronger for the next chapter, we will conduct a strategic review and accelerate our transformation towards sustainable profitable growth. So thinking about beyond 2024, how should we think about building blocks contributing to profitable growth? Firstly, you have seen our new guidance for 2024. If we take this as a starting point for our thinking, we should then see the full-year effect of the priority reset, that is an additional EUR30 million gross savings on top of 2024. The components being capacity adjustments, procurement savings, portfolio cleanup, and footprint improvement. As part of our transformation program, we will look into measures to enhance productivity, better leveraging scale, reducing complexity, and reducing process costs. Finally, we should see Evotec leveraging revenue growth once the market picks up again. And please allow me to say that our differentiated offering should yield at least average growth actually faster than growth as we have performed in the past. We're now doing a company-wide strategic review. As part of that, I expect a further sharpened perspective on our portfolio of businesses, our footprint, and our positioning. We've listed upcoming important dates here on this page and we are very much looking forward to meeting you there and speak about Evotec. As you also noted, we made the decision to take out the Capital Market Day in October, which was planned along the site opening of a new J.POD in Toulouse. Given the latest developments and the news flow, we think it's appropriate to repurpose this event. We're therefore offering an extended Capital Market Briefing on November 6th, along with our next quarterly results presentation. Further details to follow. Let me close the presentation by thanking all of our employees who've done a fabulous job during admittedly not easy times, and our partners for the high level of trust, collaboration, and loyalty. I have deep conviction in our ability to successfully reposition Evotec to grow the company and deliver superior value for all our stakeholders. Thank you. Now back to Udith for the Q&A session.

Thank you. We will now begin the question-and-answer session. The first question is from Jack Reynolds, RBC. Please go ahead.

Hi. Thanks for taking the questions. Covering for Charles Weston today. I have two, please. First was on shared R&D. So was this weakness because existing customers and contracts have delayed the work that's currently ongoing or are there kind of fewer new projects starting? And I guess just kind of thinking about the wins with the recent wins, how does this translate into revenue over the next 12 to 18 months? And the second question was just on the cost savings. You mentioned that you start to see benefits in H2 and then see benefits of EUR40 million in 2025. Does that mean the benefits kind of ramp through H2 and are fully realized by 2025 or do they continue to ramp through 2025, implying there could be additional benefits in 2026 and beyond? Thank you.

Thank you, Charles. And I hand over the first question to Matthias, and I think the second one to Laetitia, and this is a very easy answer.

Thanks for the question. And this is Matthias here. Good afternoon, everybody. That is really a question at the heart of what we try to present today because we see positive feedback on the value proposition from our customers, which are often integrated longer-term projects. Time period, just to give you an illustration, could be easily two to three years for longer-term periods. These projects, when we have talked about the delay, are converting from sales to revenue, but we have seen more recently a little bit of trend that it takes a bit of time from project start to actually more broadly leveraging the Evotec capacity and capability. To bring that a little bit to life, you might start with some target validation work, some biology work before we then ramp up more fully medicine design, chemistry work, etc. So that's really this peer that sales translate into revenues over a longer period of time, as Christian has presented before. So now you had a sub-element in there are fewer projects starting. I think on balance, I have to say, yes, just by the number of projects because we have been clearly saying that we are lacking volume on the more fast-turning, very transactional work that are, by nature, also smaller in value. So this is, of course, in a higher number of projects. And that's something which correlates well with market momentum. And as we have presented again, I mean, we see not signals for market recovery. So that's part of the question I have to answer, yes, the number of these transactional work projects is lower. And then your last bit of the question, a recent win, how do they translate? You have seen the exhibit that we had our best quarter in Discovery. Now that you could roughly say that 70% of that sales volume are multiyear, longer-term projects. And those are very small, as I just tried to explain, so they really translate into revenues well into next year and even beyond 2025. Hopefully, that gives you a little bit of calibration, and then I hand over to Laetitia.

Thank you, Matthias. To answer to your question regarding the cost savings we aim for with our project reset. Here, we can confirm that as of July this year, we will start having in the P&L FX and savings already in 2024, meaning, that we aim to close and get that fully on a full-year basis in our result of 2025, representing EUR40 million. So this year, around EUR10 million, we will already have activated, and it will be realized savings, full-year impact next year and onwards. So it's recurrent savings. So it's EUR25 million, and we can count on it for the year after.

Great. Thank you.

All right. Thanks, Charles. And back to Udith.

Hi. Thanks for the question. It's Ben Jackson, Jefferies. Firstly, just with the 2024 guide, are you able to give us a little bit of color about the relative contribution from each of the business segments? Is that something that you have clarity on and can provide towards? And then secondly, just more high level, are you able to offer a little bit of insight into what you're seeing from the large pharma spending front? Has there been any particular softness in that perhaps the preference for later-stage trials and any kind of industry-level trends that you're thinking that are worth highlighting? And then also off the back of that, if you're seeing a particular shift in what the large-cap pharma and perhaps the mid-biotech as well are pursuing perhaps as a result from pressures of IRA? Thank you.

Thanks, Ben. And again, on the market side, Matthias will respond. Then on the financials, Laetitia will take the question.

Okay. So on the financials, I start regarding the guidance and the main drivers. So as said previously in the presentation, we have three main buckets there with shared R&D. We have, obviously, the delayed market recovery. And as we said, the slower sales to revenue conversion, which shifts our growing order book into 2025 and reduces our full-year EBITDA expectations by EUR50 million to EUR55 million versus the previous guidance. For Just - Evotec Biologics, we are learning as we ramp up operations. Additionally, we are front-loading costs to meet significantly expanded sales orders in future years, leading to higher COGS in 2024. It represents about EUR50 million expected negative EBITDA impact versus the previous guidance. And we also highlight the unprofitable business in Halle and Orth that we have identified as a non-core asset, which has contributed by EUR5 million EBITDA downside. So I would say the combination of the three elements brings the revised guidance to as confirmed and communicated last week. And I would say, yes, at this point, our capacity is highly sensitive to the level of revenues. When I come I explained the shared R&D is directly driven by the top line. We know that it's highly sensitive to the level of revenues we have due to our fixed cost base business. And this is the result of capacity expansion in previous years that we have been starting to address as per our presentation already done earlier. So we have now to really shared R&D top line driven directly largely contributing to the drop in EBITDA costs and ramp-up and learning on Just - Evotec Biologics and I would say the true noncore business that has generated around EUR5 million versus previous guidance drop. Moving then Matthias to you.

Yes. Let me cover a little bit your question on the market and big pharma. So in our last presentation in May, I explained a little more in detail how we see the market from a CRO, CMO perspective at the buyer's market. I think we are still in it. And I think in one key message from us today is we don't see the market for recovery just to happen this year. So that's what we anticipated earlier. Now with that macro statement, let's dive a little bit into pharma. I mean, to your point, I mean pharma US is, of course, a core market and pressure on pharma, that's one part of an issue that we see, I mean, wherever the election goes. So there's, of course, economic pressure on pharma. How does it translate into R&D? So it's very evident from big pharma, from discussions with our customers from you see it on the biotech on the receiving end. There's a clear prioritization of R&D spend in the clinical phase, focus on clinical assets, also narrowing and focusing on key indications and therapeutic areas which puts research spending under pressure, which is, of course, part of our business. BIOSECURE is somewhat, I say that's carefully compensating for us. So we see some interest from big pharma to look into more transactional activities, but it's too early. I think the timeline will carry well into next year because it's, I would say, in exploration mode because the big pharma have multiyear projects with Asian partners. And you asked also on the IRA, I think, it's one factor contributing to economic pressure because most pharma from our experience do see the relevance of small molecules, given it's from a scientific side an important modality, but of course, there's additional pressure. Hopefully, that gives you a little bit of color. And back to Udith.

All right. Thank you, Ben. And Udith, any further questions, please?

Hey, thanks for taking the question. I want to follow up on just sort of a broad question on the market challenges you're seeing. You just talked through a lot of what's going on with Biotech with NaturePharma. I think it's safe to acknowledge that visibility remains limited for everybody in the industry in terms of these market challenges and how long they'll last. Now you talked about some of those persisting into 2025. What if it persists longer, right? We're talking about Biotech funding. We're talking about IRA. Some of these could drag significantly further. So how do you feel about the setup there? And I guess tied to that, talking about the long-term algorithm, the long-term growth construct? Any comments you made there in light of the recent changes? Thanks.

Thank you, Michael, and probably a bit early to comment on the market for 2025. But Matthias, please.

Okay. This is, of course, a very important question, and we don't want to sound like, oh, let's hope for the future. I think what we are saying today is, I think by now, we understand the market well in the here now where the pressures are. So that, I think, one step of the base where we are today. The second step is, which is important to realize we are able to sign strategic deals in the current market environment, which means we have positive feedback or there is an unmet need for our value proposition. And that's why it's too early to talk about future strategy, future plans. I mean, that's an anchor point for future growth and future profitability. Now in consequence at least for the more, what we call, fast-turning transactional work, there is one scenario, which is what we anticipate market recovery in 2025. If not and there's a delayed persistence of the weaknesses, of course, I think, and there I go back to Christian, he has talked about portfolio capacity adjustments, etc., that we have to take into account such measures like our competitors are doing.

Okay. And tied to that, you've identified some costs in terms of both facility but also some capabilities, the gene therapy business, the large-scale API manufacturing. Are there any is that ongoing? Is there a possibility for further cost reduction and further refocus of some of the capabilities of the organization or would you say that component of the plan is done? You've identified everything there is to cut.

Yes. Thank you, Michael. And what I was trying to allude to is, obviously, we're in a phase right now where we're doing a strategic review and we are also in a transformation. And I would not suggest that our journey is completed. Think about it in components, and I was trying to lay that out a little bit on the last slide. The reset that we started earlier this year has led to a sizable impact for the initiatives that we have taken. But then also when you consider that we've been growing the last 10 years at a very high pace, obviously, there is room to optimize. We will do a strategic review, as I said, but we also definitely will look into productivity levers. Part of what we've done right now is also to adjust the capacity to the new market environment. I think there's clearly room to upgrade the Evotec model when it comes to processes, systems, and so forth. And that is part of our transformation program. So the clear answer is yes.

Great. Thanks for the questions. I have three questions on Just - Evotec Biologics. So first, the acceleration of the capacity ramp-up in Toulouse, can you provide more details on how much you're going to be building out Toulouse? Are you going to be maximizing the Toulouse capacity or just building out to the existing sales book? And then second, is there any plans to build out capacity at the Redmond site? And then third, can you give us a sense for how much reserve capacity you're committing to Sandoz on a percentage basis of your expected capacity in the future? I ask because due to BIOSECURE there may be a shortage of precision biologic manufacturing as US companies transition away. I'm just trying to get a sense for how you're thinking about the cost of investment today in Just - Evotec Biologics versus profitability impact versus potential future opportunities? Thank you.

Thank you, Steven. And again, Matthias, on Just, please.

Steve, it's great to hear from you. Thank you for your questions. We've communicated about the accelerated ramp-up and the profitability impact on Just - Evotec Biologics while staying committed to breakeven. We're learning as we proceed, and it's important to note that this involves a new technology capability that we are developing. We're not focusing solely on maximizing Toulouse; instead, we are accelerating the established capacity plan for Toulouse. We do not have plans to expand Redmond at this time, nor are we discussing the next J.POD. Our aim is to implement the capacity we've talked about as quickly as possible so we're prepared for the coming year, which is why the opening of J.POD Toulouse is on schedule. Regarding your second question, while I can't provide exact percentages or numbers for Sandoz, I can confirm that we have made a significant commitment and that Toulouse will be crucial. We are also open to partnering opportunities, despite this not being a business development call; it is a significant aspect of our strategy. The area of precision medicine is something we are particularly focused on, and we believe that both Redmond and the Phase I supply have the potential to offer us a strong position for that opportunity. This is an essential area we are counting on for our future.

Maybe just to add that, obviously, we have different components here and the commercial manufacturing comes later and absorbs more capacity, but in earlier stages, there's more development work. So naturally the mix here is changing over time.

Steve, hope that's okay. Otherwise, we can take offline.

Udith, I hear we have, I think, three more to go.

Good afternoon, thank you for taking my questions. Christian, the first two questions are for you. Obviously, a strategic review is something, right, that's an ongoing process, right? You always try to optimize your company. But how much more time are you giving yourself with this very initial strategic review since you've just joined the company? And then my second question is thinking about this capital market briefing on November 6th. Do you feel like you'll be in a position to provide a new medium-term outlook to the capital market? And then my third question is going back to the market and environment. And what we're hearing out of the US is that firstly, increasing competition in the CRO space and then also more competitive pricing, which could obviously be a bit more of a structural problem going forward. How do you view the situation there? And do you stand by your statement that you're not losing market share this year? Thank you.

Thank you, Falko. To begin, I believe every company should undergo a comprehensive strategic review every few years, and it's been quite some time since our last one. Regardless of my presence, this review is timely. However, I want to clarify that while we conduct this review, we won't delay implementing decisions that could enhance our company's performance. I mentioned the strategic review and accelerating our transformation program, and you've noticed our swift actions regarding resets, which will yield EUR10 million this year and an additional EUR30 million next year. It's important to view this as a dual approach; we will seek opportunities to boost our productivity through the transformation program while also examining the strategic elements of our business. This may involve optimizing our operations or identifying other ways to enhance our portfolio. The strategic review shouldn't give the impression that we're idle for a few months. During the Capital Markets briefing in November, we aim to provide an update on our thought process and will inform you in due course if this includes insights for next year. At this moment, I am not prepared to discuss it further. Now, regarding the competitive situation in the US, Matthias?

Yes, sure. Hey, Falko. Thanks for the question. I think I would love to give a little bit nuanced answer. First of all, we have to, in the here and now, we have high competition. I think you might remember a couple of months ago, when I introduced how we think about this market and called it a buyer's market. So let's not sugarcoat it, competition is high at this moment of time. So that is, however, a nuanced statement because not all elements in this market are actually price-sensitive. So it's a big difference if we talk about, let's say, synthetic chemistry and FTE outsourcing or we talk about a tailor-made high-end biological assets. So as such, competition is high that we are facing. And I think we are definitely, I would say, winning, I'm not able to say if we are gaining share in the more long-term integrated programs for the more transactional work. We have definitely the weakness we have been talking about. So that is a nuanced picture here. We are not afraid of given our productivity to compete. We have stable win rates. So we monitor that quite carefully across all aspects of our business and our CRM pipeline. Again, win rates are stable. So we feel we are not losing share because of those factors, but to acknowledge competition is high.

Thank you.

Thanks, Falko, and I hope that helps a bit with your questions. Then back to Judith.

Yes. Thanks and good afternoon. First one would be on cash flow. So in the previous quarters, we have seen a cash burn of roughly EUR80 million per quarter. So what do you expect here for the rest of '24 and also maybe looking already into '25? And then the second one is on the new RCF. You have mentioned preexisting covenants for the new RCF. Maybe you can share some details with us on these covenants. Thanks.

Thank you, Stephan. And all questions go to Laetitia.

Hi, Stephan. It's Leticia. So answering first with your question regarding the cash flow. What we expect and what we are targeting is a stabilization of our free cash flow trending towards breakeven for the rest of the year. So, yes, you are right. H1, we have not as good as we anticipated cash flow, but we have now measures and actions in place. And also, I would say, if we look at the liquidity level in H2 overall, beyond the cash flow, we stabilize given the already confirmed payments that we mentioned in the presentation from BMS. And most importantly, the improving operational performance in the second half of the year. We have additionally plans to improve our cash position and you will hear more about our measures in the coming analyst call. Then moving to your second question which reminds me?

Revolver.

So the refinancing we just did in July, refinancing with the main seven banks around EUR250 million facility that we get from there. And we are currently having for those ones a covenant around 375 at year-end. And that's the target we are currently looking at. And for now with what I told you regarding the improvement of operational performance as well as the payments that are already confirmed above EUR100 million from BMS that will come in Q3 and the additional plan that we have, we are having a strong plan to be in line with this covenant.

Yes. And covenant testing will be at the end of this fiscal year or?

December 2024.

Good afternoon. Thanks for taking my questions. First one on the revenue mix in shared R&D, you've reiterated how the Discovery order book is strong, but development is perhaps lagging behind in terms of performance. What proportions of the overall revenue within shared R&D do those different elements comprise? That's the first one. Second one, you highlighted despite the strong order book in Discovery in the first half, certain parts of the business in terms of revenue performance were weaker. I was just wondering what particular parts of the Discovery business are weak. And do you see recovery with those in terms of the order book, or are there any logical kind of savings to be made there by not offering certain services? Thank you. Any detail if you can provide would be helpful.

Thank you, Joseph. The first one, I hand over to Matthias. You take the second one as well.

Yes, let me try, and then Laetitia you can bid on it or Craig. Let's see what we have to add. Joseph, thanks for the question. I think in terms of revenue mix, I think we are not further breaking down our revenues into detailed sub-elements beyond shared R&D and Just - Evotec Biologics. We have been starting to talk about two elements in shared R&D: discovery and development; and it's roughly 70-30. 70% discovery, 30% development. Now I think what we had already, I have to remember in the full year or in the last call, because when we talked about the other part, I mean, where's the weakness, we talked about the transactional. Today, we use the word also of fast-turning elements of the business where we see the weakness. Those are also roughly 30%, but to make the complex story simply, it's not identical 30%. Because if you think about our development business, we have actually a highly attractive integrated product, so that's part of development. And part of development is very transactional, stability testing, whatever comes to mind. So the message that we bring across here is really strong value proposition traction on the more integrated offerings. Cross-functional longitudinal longer term and weakness, which sets partly in development and partly also on more transactional discovery services.

No. Only just to reemphasize that there are a number of components in the shared R&D offering, which are highly differentiated, highly attractive and doing extraordinarily well. Our disease area expertise, molecular patient database and PanOmics driven drug discovery. These are very high-value offerings in an environment which is competitive, but are also very differentiated. And when coupled with our full integration that leads to these multiyear strategic partnerships that Matthias referred to. That's what gives rise to our confidence in the future outlook of shared R&D.

Thanks, Joseph. I'm asking Udith. I think we have no further questions. It's 10 past 3. Just a final check.

Yes, I confirm that there are no more questions registered.

Okay. Then I just for the process hand over to Volker for any final words. No, he's saying I'm going to close the session. Thank you very much for the attention and looking forward to meet or talk to you very soon. Thank you.

Ladies and gentlemen, the conference is now over.