Evotec AG O.N. (DE:EVTG) delivered its Q216 and full H116 results last week, with sales largely in line with our expectations, while profits were boosted by lower than expected operating costs and higher other income. The company has raised its guidance and now expects adjusted EBITDA to more than double in 2016. Bayer’s move to Phase I with endometriosis is the most prominent news recently. Healthy cash flows and a maturing preclinical pipeline should support the share price in 2016 and 2017, in our view. We have increased our valuation to €620m from €575m.
Sales in line, better profits, decent H216 ahead
Evotec’s Q216 revenues were largely in line with our expectations and grew 13.6% y-o-y to €38.0m driven by a strong performance in both segments: EVT Execute, the drug discovery services business, and EVT Innovate, the collaborative academic/pharma drug discovery business. Q216 also included Sanofi (PA:SASY) revenues, consolidated from Q215 and thus more reliably reflecting organic y-o-y growth. Adjusted Q216 EBITDA of €8.6m was better than our forecast of €4.2m, mainly due to lower operating costs and significant net other income. Evotec has raised its guidance for FY16 adjusted EBITDA and now expects it to more than double y-o-y.
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