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Evotec Reports Strong Q3 Growth


9 November 2006 - Hamburg, Germany | Oxford, UK – Evotec AG (ISIN: DE000 5664809, EVT) today reported strong growth in revenues and profits for the third quarter 2006. Group revenues of the Hamburg-based drug discovery and development company increased by 30% to EUR 24.6 million (Q3 2005: EUR 19.0 million) with all three divisions (Services, Pharmaceuticals, Tools & Technologies) contributing. The main revenue drivers include the above average performances in pilot plant and formulation services, the successful installation of an ultra-high-throughput screening system in the US as well as a milestone payment from the Japanese research partner Takeda. The gross margin in Q3 was therefore particularly high at 39.9%.

As a consequence, Q3 operating result improved by 46% to EUR (4.2) million (2005: EUR (7.7) million) despite continued higher R&D investment. As planned, Evotec has increased its R&D expenses for the third quarter from EUR 3.9 million to EUR 7.3 million due to a higher investment in proprietary CNS drug development (Pharmaceuticals Division). The Q3 operating results for the Services and Tools & Technologies Divisions were positive. The Q3 operating loss before amortisation for the Evotec Group improved by 28% to EUR (3.1) million (2005: EUR (4.3) million).

Q3 Highlights:
• Phase II with insomnia drug candidate EVT 201 started
• Development of Alzheimer compound EVT 301 discontinued
• Phase I with Alzheimer/neuropathic pain candidate EVT 101 successfully completed
• Evotec continues development of EVT 101 into Phase II trials: Roche did not opt in after Phase I, however, expressed continued interest in further option rights after proof-of-concept
(after period end)
• Second milestone payment received from Takeda
• Drug discovery collaboration initiated with Daiichi

“Evotec “Q3 was the strongest quarter of the year. Revenues as well as profits increased significantly over last year. These quarterly results, although they can not be extrapolated and need to be evaluated in the 2006 full-year context, indicate that all our divisions are performing well and we are on track to achieve our corporate objectives“, said Joern Aldag, President & Chief Executive Officer of Evotec AG. “Our proprietary drug development is progressing well. We have two promising CNS candidates in our portfolio, one in Phase II (EVT 201) and one about to enter Phase II (EVT 101). The first efficacy data in patients should be reported next year and we are looking forward to this important milestone.”

Evotec on track for full year 2006
Evotec revenues for the first nine months 2006 increased by 15% to EUR 61.2 million (2005: EUR 53.2 million). All three divisions contributed to revenue growth: Services Division up 10% to EUR 47.7 million (2005: EUR 43.3 million), Pharmaceuticals Division up 155% to EUR 2.9 million (2005: EUR 1.1 million) as well as Tools & Technologies Division (third party revenues) up 21% to EUR 10.7 million (2005: EUR 8.9 million).

Gross profit for the first nine months of 2006 increased by approximately 30% to EUR 23.2 million (2005: EUR 17.9 million), translating into an improvement in gross margin to 37.9% (2005: 33.6%). R&D expenses for the first nine months increased substantially as planned from EUR 8.6 million to EUR 24.1 million, primarily originating from proprietary drug development. All other operating expenses including SG&A, amortisation of intangible assets, impairment of goodwill as well as „other operating expenses“ amounted to EUR 21.4 million (2005: EUR 44.4 million). This reduction mainly results from the fact that such operating expenses 2005 included charges from acquisition-related goodwill impairment of Evotec Neurosciences and regular amortisation charges from Evotec’s acquisition of Oxford Asymmetry International in the year 2000, and that neither occurred in 2006.

As a consequence, group operating result improved by 36% to EUR (22.3) million (2005: EUR (35.0) million). The operating result in the Services Division was positive at EUR 1.4 million in the first nine months of this year. Group net loss declined to EUR 16.1 million (2005: EUR 35.6 million).

Solid balance sheet structure
Evotec’s cash position at the end of September amounted to EUR 57.3 million (end of December 2005: EUR 53.5 million). The increase is primarily a result of the capital increase in April 2006, partially offset by higher R&D spend. The equity ratio as of 30 September 2006 was approximately 80%.

Strong order situation, guidance increased
Evotec is increasing its revenue target for the full year 2006: from EUR 77 million – EUR 81 million to EUR 82 million – EUR 84 million. Group R&D spend is anticipated to come in at middle of the Company’s guidance (EUR 30 million to EUR 35 million). Based on this adjusted guidance, Evotec’s targeted liquidity position at the end of 2006 increased to over EUR 50 million.

Conference Call
Evotec will hold a conference call today at 02.00 p.m. CET (01.00 p.m. GMT/08.00 a.m. US time East Coast) to discuss the financial results as well as Q3 progress. Joern Aldag, President & CEO, Dr Dirk Ehlers, CFO, and Dr John Kemp, Chief Research & Development Officer, will lead the call.

Conference call numbers (listen only):
Europe: +49.(0)69.2222 3105 (Germany)
+44.(0)20.7138 0827 (UK)
US: +1.718.354 1358

A replay of the conference call will be available for 24 hours and can be accessed in Europe by dialing +49.(0)69.22222 0418 (Germany) or +44.(0)20.7806 1970 (UK) and in the US by +1.718.354 1112. The access code is 9473629#. The on-demand version of the webcast will be available on our website: - Investors – Financial Reports.

About Evotec AG
Evotec is a leader in the discovery and development of novel small molecule drugs. Both through its own discovery programmes and through contract research partnerships, the Company is generating the highest quality research results to its partners in the pharmaceutical and biotechnology industries.
In proprietary projects, Evotec specialises in finding new treatments for diseases of the Central Nervous System. Evotec has two programmes in clinical development: EVT 201, a partial positive allosteric modulator (pPAM) of the GABAA receptor complex for the treatment of insomnia, and EVT 101, a subtype selective NMDA receptor antagonist for the treatment of Alzheimer’s disease and/or neuropathic pain.
In contract research, Evotec has established itself as the partner of choice for pharmaceutical and biotechnology companies worldwide. The Company provides innovative and often integrated solutions from drug target to clinic through an unmatched range of capabilities, including early stage assay development and screening through to medicinal chemistry and drug manufacturing.
In 2005, Evotec has generated sales of EUR 80 million with 600 employees located in Hamburg, Germany and near Oxford and in Glasgow, UK.


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