Earnings Call Transcript - EVO Q3 2023

Werner Lanthaler, CEO

Welcome to our Q3 Call, titled Resilient into the Future of Biopharma R&D. This presentation is available online, and you can join the call with the presentation. Resilience is about overcoming the unexpected, and our goal is to follow science and technology while thriving with our partners. Throughout this presentation, you will see that resilience is not just what happens to us, but how we react, respond, and recover from events. I’m here with my team, including Laetitia, Matthias, Craig, and Cord, and I want to thank them for strengthening resilience in our company. On page five of the presentation, you can see highlights from Q3. Reflecting on this year, we are experiencing strong growth again with the cyberattack behind us. We are reporting a 14% growth on the topline and 13% on the bottom line, which is a great outcome despite the cyberattack. More importantly, we are focused on our long-term future, with significant events highlighting this, such as a major collaboration in neurodegeneration with BMS that began in 2023, the continued validation of our Just-Evotec Biologics business, and our tech alliance with Sandoz, along with an agreement with the Department of Defense. Our second J.POD in Toulouse represents a vital investment into the future. We are building pipelines with our partners, which is a key measure of Evotec's future value. We'll discuss multiple events driving this value forward later in the presentation. We are devoted to following science, evidenced by translating science with Novo Nordisk and our BRIDGEs out of Singapore. We are also fully committed to our ESG goals, as seen in our SBTi targets. Much is happening in our company, particularly in the context of the challenging biotech landscape post-COVID, where market volatility exists. We believe our business model separates us from other companies that simply react to crises; we are creating opportunities from them. Our model is an answer to the biotech funding crisis, not part of the problem. If you turn to page six, you'll see that during times of volatility, long-term objectives are crucial. We believe our differentiated platforms, especially PanOmics, position us well for the future, and we are on track to achieve many goals from our Action Plan 2025, with more expected by 2025. Our Just-Evotec Biologics is set to come fully online by the end of 2024, as we are currently building out capacities. Our business dynamics look strong, and we anticipate double-digit growth in 2024, underscoring our business model's differentiation. Now, let’s delve into our Q3 results, and I’ll hand it over to Laetitia.

Laetitia Rouxel, CFO

Thank you, Werner, and welcome everyone for joining us today to discuss our financial performance over the past nine months. As shown in slide eight, we had a very strong start to the year with revenues in Q1 2023 reaching €213.6 million, representing a growth of 30% compared to Q1 2022. This excellent performance was supported by a solid underlying business and strategic collaborations with Janssen and BMS. However, in Q2 and Q3, we faced challenges due to a cyber incident that required a brief operational shutdown to protect our partners and stakeholders, resulting in missed opportunities of around €70 million. Despite these setbacks, we continued to expand and develop crucial partnerships, such as the tech collaboration between Just-Evotec Biologics and Sandoz. Our financial resilience was reflected in Q3, with group revenue nearing €200 million and total revenue for the first nine months reaching €580.1 million, an increase of 14% from the previous year. In the next slide, I will summarize our balance sheet and cash flow details. From December 31, 2022, to September 30, 2023, total assets declined slightly by €2.7 million to €2,254.5 million, with changes in asset composition due to cash allocations for capital expenditures. As of September 30, 2023, our stockholders' equity decreased by €46.4 million to €1,140.8 million compared to the end of 2022, mainly due to the net loss, resulting in an equity ratio of 50.6%, down from 52.6% at the end of last year. We maintain a strong equity position to support future investments and ensure financial flexibility. Our operating cash flow for the first nine months was €15.2 million, compared to €236.6 million in the same period last year, which was significantly influenced by a €200 million upfront payment from BMS. This year’s lower figure was impacted by the cyber incident but was offset by payments received from our BMS collaboration in euro and protein degradation. Cash and cash equivalents stood at €499.4 million in September 2023, increasing due to higher short-term investments in our group liquidity. Total liquidity decreased to €613.4 million as long-term investments matured and were used for capital expenditures, which totaled €150 million, comparable to €157.2 million last year, primarily driven by enhancing Just-Evotec Biologics’ capabilities in the U.S. and Europe. Our cash investments in affiliates and associated companies dropped to €15.8 million from €70.7 million last year. Moving to the next slide, our group revenues for the first nine months of 2023 showed a strong 14% increase to €580.1 million, supported by a diverse business portfolio despite the challenging environment. Key growth drivers included our BMS/Celgene programs and the successful execution of work packages under our new technology partnership with Sandoz. Our base business grew by 14%, from €502.7 million last year to €575.3 million this year. Evotec recognized milestone, upfront and license payments totaling €4.8 million. Just-Evotec Biologics contributed €74.1 million in the first nine months of this year, compared to €27.9 million in the same period last year, nearly tripling its revenues in just 12 months. Regarding cost management, the cost of revenue for the first nine months of 2023 was €442.7 million, resulting in a gross margin of 23.7%. This margin increase was supported by collaborations with BMS and Sandoz. Excluding foreign exchange impacts related to our capacity building at Just-Evotec Biologics, the total gross margin would be 26.7%, slightly down from 27.3% the previous year. Unpartnered R&D expenses were €45.7 million, a 10% decrease from the prior year, partly due to a temporary reduction in R&D costs from the cyber incident. Our adjusted group EBITDA, excluding one-off cyber-related costs for the nine months ended September 2023, was €50.2 million, reflecting missed opportunities after the cyberattack and higher managed costs. Internal recovery costs in Q3 2023 were mitigated by improved cost structures, resulting in adjusted EBITDA for Q3 2023 of €16.3 million compared to €11 million in Q3 2022. Adjusted EBITDA for the first nine months of 2023, excluding Just-Evotec Biologics, would have reached €55.9 million. As for our guidance, it remains unchanged as previously communicated in our business update in July, with expected revenues of €750 million to €790 million, unpartnered R&D expenses projected between €60 million and €70 million, and an adjusted EBITDA target of €60 million to €80 million for the full year. We believe our EBITDA guidance will be met regardless of the external cyber cost treatment. Moving on to slide 12, I will provide an update on our key activities focusing on cost efficiency and optimization. We are making significant progress in streamlining processes across all our sites, including optimizing headcount and implementing various cost containment measures that have yielded considerable savings in 2023. In early October, Evotec started the social process of redeploying its chemistry activities out of Marcy Lyon, while simultaneously preparing for a focused ERP build-out in the U.K. and J.POD Toulouse in Europe. We have reprioritized capital expenditures to optimize cash, anticipating a €50 million reduction by year-end 2023 and cutting back on equity investments. The positive news is that our diligent efforts have been recognized, and we expect total savings of €25 million for the full year, demonstrating the effectiveness of our initiatives for cost optimization and efficiency. We will continue to pursue our 2025 strategy for sustainable growth and cost management, remaining committed to our shareholders and our mission for impactful medicine. In conclusion, we are working towards a more efficient and resilient future, where research continuously progresses. Thank you for your trust and support as we carry on with this remarkable journey. Now, I will turn the floor back to you, Werner.

Werner Lanthaler, CEO

Thank you, Laetitia. On page 14 of this presentation, we want to emphasize that our key growth drivers are the paradigm-shifting platforms. We take great pride in our comprehensive shared R&D service platforms, which serve as the foundation for our long-term stability and the quality of services we provide. As I mentioned earlier, our unique technology platforms are essential for our future success. This builds upon our end-to-end shared R&D platforms, and if you look at the graph, you'll see significant growth contributions from PanOmics and Just-Evotec Biologics, just to name a couple. This is why we often state that we are just at the beginning of these transformative platforms that will impact the industry. As you move to page 15, you'll see how we are influencing the industry through pipeline development with PanOmics and other technologies. It's important to remember our goal to build the largest royalty pool in the industry via our partnered R&D model. The figures on that slide clearly illustrate this: the €15 billion in milestones are already contracted, and the 8% to 10% royalties are also secured. These milestones will be a crucial driver for profitability and sustainable growth moving forward. We are extremely proud of our partners and the collaborative pipeline we are developing, which efficiently leverages our R&D platforms for pipeline growth. Moving to page 16, when we discuss our pipeline efforts, we often use an iceberg analogy. At this stage, you can only see the tip, which shows 18 projects currently in or near the clinical stage, but there are over 120 projects that will feed this pipeline in the years ahead. Thus, we expect a steady flow of news from this iceberg in the future. On page 17, we highlight some co-owned or partnered projects that will bring news, emphasizing the benefit of our business model where the costs for generating these partnered projects are usually borne by our partners, making this a risk-free opportunity for us. On page 18, I want to point out our other paradigm-shifting platform, Just-Evotec Biologics, which I mentioned earlier. We call it paradigm-shifting because continuous manufacturing has the potential to transform a high-cost industry into one that is more affordable. Fully continuous manufacturing will increase accessibility for biologics, truly deserving the label of paradigm-shifting. The two pictures here illustrate this well; the lower image shows nothing, while the upper image shows the J.POD Number 2, which represents a remarkable achievement in just 12 months. I want to thank everyone at Evotec for this tremendous advancement, not just with J.PODs but throughout our entire platform. On page 19, our efforts would not make sense without market support, and we are thrilled with the validation Just-Evotec Biologics is receiving, even in challenging times for the biotech market. Our capacity for discovery and development is already well-utilized, and we’re expanding our capacity based on anticipated demands with ongoing discussions for 2024 and 2025. Clearly, 2024 is fully booked for Just-Evotec Biologics, and 2025 will be filled through our developing business pipeline. The €850 million in contracted sales reinforces our position as we now have eight times more contracted sales than just a year ago. As we turn the page back to governance and the impact we aim to achieve, it is crucial that near-term Science Based Targets are validated and approved. This is vital because we have always committed to our ESG promises, aligning our initiatives with our partners to adhere to the Paris goals. Like many larger companies, we have now validated our Science Based Targets through SBTi, which we’ll publish on our website tomorrow. This sends a strong message that, as a company, we are committed to making a difference not only for patients but for the planet as well. On page 22, we appreciate analysts who acknowledge our efforts, as a company that receives upgrades for environmental initiatives is beneficial for any investor's portfolio. An example of this is the recent upgrade from EcoVadis. Page 23 reiterates our three focus areas in ESG: environment, social impact, and governance. For our social impact, we aim to foster the best internal environment, which is why we value feedback for improvement. Starting tomorrow, 5,000 employees will participate in an engagement survey called Evo voice to assess how we can enhance our company culture and partnerships. Turning to page 24, governance is crucial for our long-term success, and we are proud of our current Supervisory Board as well as our continuous efforts to enhance it with individuals who have proven industry expertise. We are excited to nominate Rupert Vessey to our Supervisory Board, who will stand for a vote in our next Annual General Meeting in June 2024. His joining will be beneficial not just for Evotec but for our partnered network as well. On page 25, despite some setbacks this year, we have shown resilience, understanding that resilience is about how we respond, and we are committed to achieving our goals as we work towards our Action Plan for 2025 and beyond. Thank you for your attention; page 26 invites you to our upcoming Capital Markets Day next week, which will showcase how groundbreaking technologies like PanOmics and iPSC-driven drug discovery are changing the landscape and how Evotec plays a significant role in that transformation. Thank you for your support, and we look forward to your questions.

Operator, Operator

The first question comes from the line of Kirsty Ross-Stewart with Citi. Please go ahead.

Kirsty Ross-Stewart, Analyst

Hi there. Yeah. Kirsty Ross-Stewart from Citi on for Peter Verdult. Two questions from me, please. Firstly, you affirmed your double-digit revenue growth expectations for 2024 in your opening remarks, but the cyberattack this year has, obviously, depressed 2023 revenues. With that in mind, can you elaborate what is possible with respect to revenue growth for 2024 on a like-for-like basis, i.e., had the cyberattack not happened, and also, whether we should expect moderate or strong margin progression in 2024, just trying to better understand the revenue and EBITDA bridge to your 2025 targets? And then my second question, just ahead of your CMD next week, would you be able to give us a small preview, in particular, what do you specifically want to showcase over and above Just Biologics? Thank you.

Werner Lanthaler, CEO

So on the CMD preview, I will then hand over to Cord, who will give you a sneak preview into PanOmics, which couldn’t be more exciting. I can only say that. And when it comes to our growth into 2024, let me please apologize that we are not giving exact guidance right now. But I think by confirming our 2025 path forward, you should see two things. One, double-digit growth is for us possible through paradigm-shifting platforms like PanOmics, where you see, for example, a much higher than 15% growth happening. On our R&D shared platform services, we can see high-single-digit and sometimes close to double-digit growth, but this is not going much higher than that, because of capacity reasons that we don’t want to and cannot build at this stage. So that’s just that you should appreciate the fact that within the portfolio, some things are going much faster in their growth and others are on high single digit. And the areas that go higher in their growth, of course, where we have high degrees of automatization, high degrees of technology in all the areas where our tech stack is leveraged. When it comes to margin expansion, that will be and should be visible, because the goal is, of course, high profitable growth within Evotec and not just growth. So without also giving guidance here, you will clearly see a higher growth in profitability than on the topline in 2024. And I hope that gives you a bit of color. With this, I hand over to Cord on a sneak preview to the CMD.

Cord Dohrmann, CRO

Hello, everybody. Good morning and good afternoon. Next week during our Capital Markets Day, we plan to provide some insights into how Evotec is positioning itself in precision medicine, primarily through our efforts in PanOmics. PanOmics represents our approach to integrating Omics technologies into the drug discovery process, starting from the initial stages all the way to the clinic and potentially the market, especially concerning the development of novel biomarkers. We will discuss some of the key elements of our PanOmics platform, including our molecular patient databases and how we utilize them for target identification, target selection, as well as discovering molecular disease signatures and patient stratification. We will specifically highlight patient-derived disease models using our iPSC platform and address the AI and machine learning technologies we incorporate throughout the drug discovery value chain.

Werner Lanthaler, CEO

Thank you so much. With this, we go to our next question, please.

Operator, Operator

The next question is from the line of Charles Weston with RBC Capital Markets. Please go ahead.

Charles Weston, Analyst

Oh! Thank you very much for persevering. One question on the short-term and one on the longer term, please. In the short-term, the effective guidance, I think, for Q4 is EBITDA of €10 million to €30 million. I will just keep going over the operator. So, it’s quite a large range. And I just wanted to understand why it’s so large and whether the change in accounting to remove the cyberattack cost means that the underlying EBITDA expectations may have come down a bit from the last time that you updated the market. I will ask my second question later, if that’s okay.

Werner Lanthaler, CEO

There is no reduction in our expectations. This is precisely what we aimed to convey. We decided to provide a clear and accurate assessment by excluding the external costs related to the cyberattack. Regarding your observation about the broad range, you are correct. However, if you follow our progress over time, you will notice that milestones often occur in the fourth quarter, as many teams wrap up experiments or move them forward. This is why individual milestones can arise and affect Q4 performance. That said, we are confident in our guidance, even if there are fewer milestones this year. We are already looking ahead to 2024 and intend to conclude Q4 this year very smoothly.

Charles Weston, Analyst

Understood. If I could press you a bit on the change, recognizing that it makes sense to exclude the costs related to external cyberattacks from an accounting standpoint, it adds approximately €12 million to this year's EBITDA. Given that you have maintained the same guidance, does that imply you would have otherwise been closer to the lower end of your range? Is that the message you are conveying?

Werner Lanthaler, CEO

I will give it to Laetitia, but my short comment is, it really is one milestone here and there and everything is fine, but Laetitia, happy to comment.

Laetitia Rouxel, CFO

It’s important to remember that the adjustment of €11.9 million reflects our true underlying performance. Regardless of how we treat this one-off external cyber cost, we anticipate meeting our EBITDA guidance without question. The €11.9 million represents our current costs as of the end of September, and we also have insurance that will contribute to our total for the year.

Charles Weston, Analyst

Thank you. My second question is about the Sandoz deal. The potential revenues you highlighted at the announcement are very high, but I understand that revenue will increase over time and there may be some initial costs as you expand the team to manage this work. Can you provide some insight into the revenue and EBITDA trajectory from this deal over the next few years?

Werner Lanthaler, CEO

Yes. Best is probably to hand over to Matthias for that question because Matthias was also really the man in the middle to create this tech partnership with Sandoz. So maybe you can elaborate.

Matthias Evers, Executive Director

Sure. Thank you for the question. Good morning, good afternoon, everyone. Regarding the Sandoz partnership, we are making productive progress and there is no change in our guidance or dynamics as previously communicated. We have begun working on an accelerated timeline for several molecules, and as mentioned in one of our last discussions, the revenues of €648 million will be spread over a few years, which reflects the typical timeline for biosimilars. We are moving into the development process for these molecules quickly. We previously indicated that the revenue will ramp up over the next three years, and I can confirm that we remain on track with no further changes at this time.

Charles Weston, Analyst

Okay. Thank you. So it’s around three years for the sort of development process there and maybe a slightly staggered start over this year and next year in terms of the beginning of the project?

Matthias Evers, Executive Director

So, yes. I mean, let’s say three plus, not to be too aggressive here, three plus, somewhat staggered, but that’s a model you can work with.

Charles Weston, Analyst

Thank you. That’s great.

Werner Lanthaler, CEO

If I may add a quick point, these are biosimilars, and we believe the attrition rate will be very low in terms of the biology. My main question is regarding Sandoz's view on the market opportunity, which suggests that we might not end up with a complete portfolio of all the biosimilars we are developing, but the biology attrition rate should remain quite low.

Charles Weston, Analyst

Thank you, Werner.

Werner Lanthaler, CEO

Pleasure. We go to the next question and we hope that works a bit better on the operating level now?

Operator, Operator

The next question comes from the line of Pippa Pritchard with Morgan Stanley. Please go ahead.

Pippa Pritchard, Analyst

Hi, there. Thank you for taking my questions. I just have two, please. So first question is on 2025 guidance for revenue of over €1 billion. How much of this is milestones, what is the probability adjustment and to what extent has biotech funding put some of these milestones at risk, for example, with the recent Exscientia pipeline reprioritization. And secondly, I was wondering if you could provide an update or some color on how the adoption of AI techniques has been across your client base? For example, what proportion of companies are outsourcing AI efforts now versus using their own internal resources? Where do you expect this to go and what would the triggers for this shift be? For example, would it be first drug to be approved using AI, technological barriers, et cetera? Any color you could provide on that and what you are seeing and what your expectations are into the future would be useful? Thank you.

Werner Lanthaler, CEO

On the second question, I want to emphasize our Capital Markets Day next week and invite you to join us, as this will allow us to discuss these topics in depth. It may take too long to fully address your concerns right now, but I'm happy to connect you with Matthias, Cord, and Craig for a deeper discussion. As for our revenue guidance and biotech funding milestones, we currently have a range of about €70 million in milestone-driven revenue. Achieving over €1 billion in topline revenue is definitely feasible without milestones, but meeting our EBITDA targets is essential for realizing those milestones, given their high gross margins. Therefore, we are quite confident about our topline numbers, while our EBITDA guidance hinges on those milestones. This makes the existing €15 billion in contracted milestones particularly significant, as they do not rely on finding partners to reach those data points; they're already secured. Generally, we don't have large milestone agreements with biotech firms. For the €15 billion in contracted milestones, I would estimate that less than 1% or maybe less than 5% comes from biotech partnerships at this point. This is why biotech funding issues or companies failing to secure funding do not affect our vision for building our royalty pool. We typically collaborate with established companies like Novo Nordisk, Lilly, and BMS, where pipeline development with us is crucial and milestones are integral to that process. While biotech funding is relevant, particularly for our underlying service business, we acknowledge that the market is softer than it has been. Nonetheless, we believe Evotec's offerings, especially our integrated services, provide high-quality data that attract funding from the venture community rather than detracting from it. Our INDiGO service, in particular, is seeing significant demand. Additionally, there is a notable interest from biotech firms seeking high-quality chemistry and biology. The recent partnership announcement with Dewpoint underscores that reputable biotech companies continue to engage with and even expand their use of our services. I hope this provides some insight. Regarding the AI question, I apologize, but I prefer not to reveal too much ahead of our Capital Markets Day.

Pippa Pritchard, Analyst

That’s absolutely fine. Thank you very much.

Werner Lanthaler, CEO

Pleasure. Next question, please.

Operator, Operator

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

Michael Ryskin, Analyst

Great. Thanks for taking the question. Can you hear me?

Werner Lanthaler, CEO

Yes.

Michael Ryskin, Analyst

Okay, wonderful. I have two questions, and I'll start with the first one. I want to discuss the updated guidance for fiscal year 2023 in relation to your third quarter performance. If my calculations are correct, it suggests a slight decrease from the third quarter to the fourth quarter. The guidance at the midpoint indicates approximately €190 million in the fourth quarter. Could you elaborate on this? I understand there was expected to be some recovery following the cyberattack, which you mentioned as a €30 million catch-up. Was all of that accounted for in the third quarter? Should we interpret the numbers as showing a significant year-over-year decline and a decrease from the previous quarter? I would like to know the factors contributing to this.

Werner Lanthaler, CEO

So a step down is clearly not expected in Q4. We might be a bit cautious, especially regarding our development business, which has a total capacity of between €150 million and €200 million. This segment was the last to come fully online after the cyberattack. We were unable to secure any contracts during the summer because we didn’t know when we would be fully operational again, and this uncertainty affected our work completion and revenue recognition, which likely contributes to the visible step down. I cannot provide a definite guide on that. However, the development business is the main factor, and up until mid-September, we were uncertain about when to start contracting again. I hope this clarifies things.

Michael Ryskin, Analyst

Okay. Yeah. That’s helpful. And then, somewhat related to that, I thought the pie chart visualization you had, I think, on slide 14 was really helpful, illustrating the growth from PanOmics and from Just, which is doing really well, obviously. But I also want to focus on just the Execute segment excluding Just, obviously, that’s been a little bit more challenged. I think I imagine that’s where a lot of the one-time impact of the cyberattack is, but even if you back that and its still roughly flat year-over-year. So I am guessing that’s where some of the, one, the development work you are talking about now is taking place, two, that’s where some of the market weakness and choppiness you talked about from biotech is going on. So I am just wondering if you could talk about that a little bit more sort of the business other than just Evotec and other than PanOmics, what are you seeing there and when do you think that can return to more consistent growth? Thanks.

Werner Lanthaler, CEO

Yes. Maybe on the second part of the question, I hand over first to Craig, who can give you really an operational view of where we are, and second to Matthias, who is out in our business development lines that you have also here better visibility. So maybe Craig first and Matthias second.

Craig Johnstone, COO

Thanks, Werner, and Michael, for your question. Regarding the pie chart, your understanding is correct, and it highlights the area most affected by the cyberattack. There are two key aspects to consider. Firstly, from a cost perspective, the Execute segment carries the majority of the group's fixed expenses, including buildings, personnel, and infrastructure. The inability to transact for several weeks negatively impacted us. Since these are fixed costs, they are not easily adjustable in the short term. On the revenue side, within what we refer to as our base business, there are variable impacts at the point of sale. Some parts of our business consist of long-term, FTE-based contracts that tend to be more resilient to disruptions in transactional work. However, there are other components of our portfolio, such as Cyprotex and certain areas of our development business, that operate on much shorter timelines—measured in days, weeks, or months. These segments experienced significant declines due to the cyberattack, making it challenging to fully recover. To update you on our current state, since Q3, we have returned to full service operations, although we are still facing some productivity challenges due to the complexity of data management as we work through the aftermath of the cyber incident. I hope this gives you insight into the operational side of your question. Matthias?

Matthias Evers, Executive Director

Thank you for the questions that allow us to discuss the underlying market dynamics. Overall, we have observed significant growth in a demanding market. This market has shifted from being more of a seller's market to a buyer's market. In our portfolio of partnerships with big pharma, mid-size pharma, and biotech, we notice that demand in biotech has been muted due to a low number of Series A and Series B funding. Additionally, we have seen budget tightening in the pharma sector, contributing to the shift in market dynamics. Nonetheless, it's important to highlight that the unmet needs, particularly for patient care and innovation in pipelines, remain very high. We continue to see a number of attractive partnerships being formed, both by us and others. While we recognize the challenges posed by the buyers’ market, buyers are actively seeking opportunities. Looking more closely at our different business types, we see strong growth in high technology-driven and PanOmics-driven partnerships. There is a variety of dynamics in our Execute segment; some areas are more commoditized and face more pressure, while others have a strong position. Overall, we have a healthy demand for our services. To reiterate what Werner mentioned regarding development, we recently announced a partnership with Dewpoint Therapeutics, which highlights the value of our development platform for companies looking to accelerate their path toward IND, and there are many interested in doing so. However, some services have become commoditized, and we have observed other CROs recently reducing their forecasts. In summary, we find ourselves in a buyers’ market, and we are adjusting our strategies accordingly, but we still see a healthy demand as a foundation for our growth.

Laetitia Rouxel, CFO

To come into the financials and to answer to your questions on the Execute evolution end of September versus last year, we are still showing a revenue growth of 5% this year, end of September being at €380 million, and last year was €363 million. So we see here exactly what Matthias explained before that the market dynamic is under pressure, but we are having good progress and good long-term projects that fill our pipeline in the short term already.

Werner Lanthaler, CEO

Great. I hope this gives you color from multiple angles, and with this, we go to next question.

Operator, Operator

The next question comes from the line of Steven Mah with TD Cowen. Please go ahead.

Steven Mah, Analyst

Great. I have two questions. One on the cyberattack, and one on Just-Biologics. On the cyberattack, I remember you guys had a filing where you indicated there were some potential unknowns, which could impact costs in the future. Can you give us a sense for any potential additional costs related to the cyberattack or is that completely resolved? And then the second question on Just Biologics and apologies if you discussed it already, I was having technical difficulties, had to dial back in. But on Just Biologics, given the pipeline momentum, what are your thoughts for multiple J.POD beyond Toulouse or do you guys have enough capacity with Redmond and Toulouse? Thank you.

Werner Lanthaler, CEO

So on cyberattack and unknowns, I would say, we are really looking at the cyberattack as something in the rear mirror and have identified all topics, cleaning up all topics and that’s why I wouldn’t say that there are any unknowns open and left and we have started also to give cost dimensions behind it. So I would really take that out of the equation as an unknown and park that. On Just-Evotec Biologics, I probably first hand over to Matthias again.

Matthias Evers, Executive Director

Thank you. At this time, we have not planned for any J.POD beyond J.POD 2. To elaborate, I agree with your observation and we are seeing significant momentum based on the validation from recent deals in the biotech sector, particularly on the biosimilar side and with the Department of Defense on the public side. We are now increasing capacity to support the J.POD, as well as on the process development side. We are engaged in multiple discussions with major pharmaceutical companies to fully explore the potential of this technology. A decision will come at some point, but it’s too early to report anything beyond J.POD 2, which we have scheduled to open later next year.

Werner Lanthaler, CEO

Maybe let me highlight one feature out of our Sandoz Tech partnership that, for example, Sandoz bought the option to potentially have access to the technology in their own S.POD, so to say, and that’s also something where we are, at this stage, exploring future ideas of where could the technology stack go and how could it go. What I think would be clearly a capital inefficient way of using this amazing technology is to build everything on our own. We really want to leverage this as well and high as possible into the future. I hope that gives you enough color, and by the way, great to hear you and regards to the U.S. And next question please.

Operator, Operator

The next question comes is a follow-up question from Charles Weston with RBC Capital Markets. Please go ahead.

Charles Weston, Analyst

Thank you for the follow-up. My question is about capacity and capacity utilization. I've noticed that your headcount has only increased by about 2% this year. You've faced various challenges and mentioned cost mitigation efforts and improved operating leverage. However, I want to focus on capacity. Historically, capacity has often been tied to the number of employees. How are you approaching capacity utilization with your current workforce and your efforts to enhance productivity? Should we anticipate a significant increase in the number of employees next year to support your 2025 revenue goals?

Werner Lanthaler, CEO

So just to highlight one area here we are and have an exact number here, more than 200 open positions that we are at this stage trying to hire for our operations to execute on just Evotec Biologics alone in the U.S. and in Europe. So and that gives you one message first, that we look for the best people and not only for a quantity of people to deliver on our operations. The second thing is, yes, we have slowed down hiring, especially in the areas where we have commoditized competition also in in our fields that we see upcoming and we are really focusing on where can we leverage technology automatization with high quality people to do that. So that’s why the number of headcount shouldn’t be the only factor to see here how we are leveraging platforms and technology. When it comes to capacity, also here it’s a mixed picture throughout the whole portfolio, for example, that we are putting capacities together where we have subcritical sites. That’s a very clear goal also for our long-term value protection plan and efficiency plan, but that’s I think, what every decent business has to do. And when it comes to hiring of next year, I don’t have the full numbers here, but you will definitely see that we will look for more than 300 to 400 people in the whole platform and that shows you that there will be a close to 10% uplift in people capacity, but a higher than 10% uplift in revenues, and that’s exactly, I think, the matrix that we want to build here. Happy to go deeper into this.

Charles Weston, Analyst

I have a question regarding the 200 open positions for Biologics. Some of these roles are quite specialized. Are you confident in your ability to find the right candidates to handle the increased workload?

Werner Lanthaler, CEO

Yes. Absolutely. Because people will love fully continuous technologies and love to be part of that paradigm shifting situation in the industry. And you wouldn’t believe it how people really stand there with stars in their eyes when they say, finally, I can now go to the high tech that I always wanted to be part of and that’s part of the attraction. So that’s why we are very confident in doing that. Last sentence on that maybe to Matthias.

Matthias Evers, Executive Director

No. And be assured we have a very tight process in place. We have, I think, a complete process underway on the recruiting side to tap into the talent pool. And also, to be clear, the input, the roles exist in the industry. So that’s why I think the love for this paradigm shift really plays out. So we are not looking for a new or unique breed of talent.

Werner Lanthaler, CEO

Great. I want to be mindful of all your time and know that many of you have a sharp stop at 4 p.m. or 3 p.m. wherever time zone you are. So that’s why, please all further questions, direct them to Volker or direct them to us directly. We are more than happy to come back to you. And before we close today, let me have a special thanks spelled out, because it’s so many people who are making quarterly reportings and who do this, and sometimes you don’t even hear them on the speaker. But with us in the room is Holger Scheel, who has been doing quarterlies together with us for more than 15 years now. And Holger will change roles and will then no longer be together with us in making these quarterly. But let me thank Holger wholeheartedly for 15 years of perfect quarterlies all together in one room here. Thank you so much, Holger. And with this, thank you to all of you and I hope to see you very soon and I hope to see many of you in person in Hamburg and tickets are cheap to Hamburg and food is excellent in Hamburg. So please come to the Capital Markets Day. All the best.