Does Europe’s Evotec offer an outsourcing model for the future?

By Zachary Brennan

- Last updated on GMT

Does Europe’s Evotec offer an outsourcing model for the future?

Related tags Evotec Pharmaceutical industry

With a small pipeline of clinical candidates, as well as R&D partnerships with top Big Pharma companies paying for those partnerships, Evotec could be in a position to re-define what it means to be an outsourcing partner.

Though it’s difficult to tell how unique Evotec’s relationships with Big Pharma are because of how few US-based CROs (contract research organizations) disclose their relationships with larger pharma in as detailed a manner as Evotec, few other CROs are working to develop their own pipeline of products, mostly because of the inherent risk.

But what’s unique about Evotec is that it’s building a potential product pipeline without bearing the financial risk normally involved because its clinical stage portfolio comprises several product development partnerships fully funded by its partners, including those from Roche and Janssen.

Still, the company is spending on R&D (research and development) and its expenses are expected to increase from about €12m ($13.1m) in 2014 to between €15m ($16.4m) and €20m ($21.8m) in 2015.

Cord Dorman, chief scientific officer of Evotec, explained in a recent conference call that the company is looking to invest in R&D that will become the basis of future partnerships with larger pharma companies that want to co-develop or acquire the assets. Evotec is currently investing in three primary areas: neuroscience -- using patient-derived iPS cells as disease models with initial focus on neurodegeneration – as well as diabetes and oncology.

And by comparison to its larger counterparts – Evotec brought in 2014 revenues of €89.5m ($98m), up 4% from 2013 – the company is still small enough to experiment. But Evotec also is able to invest in R&D because of its portfolio of more than 70 alliances with large and mid-sized pharma companies, as well as a global drug discovery business with 850 employees in offices in the UK, Germany, France and San Francisco. A number of those partnerships also hit milestones in 2014, including from Roche and Boehringer Ingelheim, though a couple were also terminated.

The gross margin for the company in 2014 was 32.8%, compared to 36.3% in 2013, and the company attributed the differences to a decrease in milestones, a write-off of a particular receivable and adverse currency movements.

Guidance for 2015 projects greater than 20% growth, including the €250m guaranteed from the Sanofi transaction, with cap ex investments of up to €10m.

COO Mario Polywka said that the new, massive deal with Sanofi​ will combine the companies’ drug discovery libraries and allow them to work with other third-parties’ small molecule libraries. New biotech clients on the east coast will also help the CRO “capitalize on the investments in biotech​,” Polywka said.

Meanwhile, the company also launched a protein production and cell services facility on the US East Coast. The new laboratory became operational in the first quarter of 2015.

Related topics Clinical Development

Related news

Show more