The German firm has been making a concerted effort to distance itself from being a services business and eventually morph into a fully fledged pharma company and the biggest financial impact of this has so far been the absence of revenue from its library synthesis services business, which it transfered to India's RSIL in a joint venture. During the quarter, this was a major factor behind the 16 per cent in sales to EUR 7.3m compared with the first quarter of 2007. At the same time the company's operating loss widened dramatically to EUR 14.4m, from a loss of EUR 9.8m in the comparable 2007 quarter, attributed by the firm to the "high investment in research and development (R&D)". R&D expenditure increased by 73 per cent during the first quarter to EUR 12.8m, primarily due to a milestone payment to Roche based on the initiation of Phase II trials for its clinical candidate EVT 302, which is being developed to treat smoking cessation. In addition, the firm is burning cash on its lead candidate EVT 201, being developed to treat insomnia, while the firm looks to partner out the drug to share the financial burden. Evotec CEO Joern Aldag said that there are "ongoing" partnering discussions for the compound and it is one of the company's "primary goals for 2008" to sign a partner for the development of the molecule. According to the firm, in trials thus far it has so far shown advantages in sleep onset, maintenance and lack of 'hangover'. Moreover, Evotec cited its "sizable clinical development program" for EVT 302, along with its central nervous system (CNS) candidate EVT 101, as a further factor beind the large spike in R&D spending. Over the past year Evotec has been taking a series of steps to divulge a lot of its services businesses and concentrate instead on its own internal research, focused on CNS diseases. In addition of the divestment of its library synthesis services business, the company has already sold Evotec Technologies to PerkinElmer and sold its chemical development business to Aptuit. In September the firm executed the final step in its current plan, making its first real foray into the US through the acquisition of a US speciality pharma company, when it announced its intention to splash out $151.8m on Renovis to obtain its first US research facility - in California - and five new drug discovery programmes at the preclinical stage. It was announced this week that the deal has now closed and Renovis is now a fully-owned subsidiary of Evotec. In this light, Evotec is confident for the financial performance of the company in the future, with Renovis strengthening its plans for a CNS focus. "We believe we have now one of the strongest CNS pipelines in our sector with three clinical candidates, a strong late-stage preclinical pipeline focusing on areas of neurological and inflammatory diseases and a strong cash position to drive these assets through development," said Aldag. He indicated that by the end of next year the company expects to have at least six compounds in clinical development, three of which should have proof-of-concept data to attract partners. "Our cash is expected to last through 2010," he added.