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Evotec AG (EVTCY:OTCPK) has approximately 650 employees mostly in Europe with most revenues coming from the U.S. and a pipeline that's been growing exponentially over the past three years. So far there's been limited U.S. investor ownership but we expect roughly a third will be U.S. investors within the next three years as the pipeline matures.
TLSR : I'm looking at the company's pipeline and partnerships which include Roche Holding AG (RHHBY:OTCQX) Johnson & Johnson (JNJ:NYSE) Boehringer Ingelheim (private) and Bayer AG (BAYRY:OTCMKTS; BAYN:XETRA). I count six drugs in Phase 1 and 2 and more than double that in the preclinical and discovery stages. The company is profitable and yet the market cap is only about 500 million (500M). What's the problem here
MH : Evotec's top-line growth could be larger if not for the company keeping rights to programs that it is building with its own hands. Evotec has had to give up revenues for the pipeline value they're building. During this time the stock has mostly ebbed sideways as investors place most of their attention on the quarterly numbers.
We find a lot of reason for optimism. This isn't a small team working on one platform or pathway. The company generates platforms and pathways as its core expertise. While there's been a spike in the number and value of Evotec's partnered programs most exciting to us is that this has occurred while profits and cash flow have been stable. In other words the pipeline value continues to grow and the company continues to be increasingly undervalued by the Street. In the past two years Evotec's top line has kept pace with the 5-10% growth in the worldwide drug discovery business. But understand that to grow its pipeline Evotec has had to "take the edge off" revenues it would otherwise receive in lieu of rights on the assets it is developing with partners.
The leading partnered pipeline asset is a Phase 2b oral drug for Alzheimer's disease EVT302 with results expected from Roche this summer. While the odds are long this is one of Evotec's partnered Alzheimer's programs which provides stable revenues in an industry comprised of relatively unstable companies.
TLSR : Michael thank you.
Michael Higgins is a senior life sciences analyst at Highline Research Advisors LLC. Prior to that he was Brinson Patrick Securities' first analyst and established the research platform. Prior to joining Brinson Patrick Higgins was a managing director and senior specialty pharmaceuticals analyst at Rodman & Renshaw. Prior to joining Rodman & Renshaw Higgins gained 10 years of drug marketing experience with Procter & Gamble Pharmaceuticals followed by 12 years as a research analyst. He has worked as an analyst with Dafna Capital Management Wedbush Securities and an independent research firm he founded 4sight Research Partners. Higgins has earned a four-star rating from StarMine for stock recommendation performance. He is most recognized for his coverage of "drug launch" companies as well as drug delivery technologies and patents. Higgins received his bachelor's degree in finance from the University of Wisconsin and his master's of business administration from Marquette University.
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DISCLOSURE:
1) George S. Mack conducted this interview for Streetwise Reports LLC publisher of The Gold Report The Energy Report The Life Sciences Report and The Mining Report and he provides services to Streetwise Reports as an independent contractor. He owns or his family owns shares of the following companies mentioned in this interview: None.2) The following companies mentioned in the interview are sponsors of Streetwise Reports: None. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.3) Michael Higgins: I own or my family owns shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Highline has helped to raise capital for Mast Therapeutics Inc. and Titan Pharmaceuticals Inc. within the past twelve months and may seek to raise capital for these companies and Evotec AG within the next twelve months. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.6) From time to time Streetwise Reports LLC and its directors officers employees or members of their families as well as persons interviewed for articles and interviews on the site may have a long or short position in securities mentioned. Directors officers employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.
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