Evotec's hybrid R&D model keeps revenue rolling

Germany's Evotec grew its revenue 37% in the first half of 2015, as its CRO-like business brought in cash to support the company's in-house R&D.

Evotec splits its operations between Execute, which handles drug research for external partners, and Innovate, which develops proprietary candidates to be out-licensed. In the first half, Execute boosted its sales by 49% over the same period in 2014, bringing in €59.2 million ($66.2 million), while Innovate banked €8.2 million ($9.2 million) in collaboration cash. About €12.4 million of Execute's total came in intersegment revenue--in which Innovate bills its sibling--bringing the company's net revenue to €55 million ($61.5 million).

Now the company is expecting total revenue--excluding milestone and license payments for Innovate--to rise about 35% for the full year, planning to spend as much as €20 million ($22.4 million) on R&D on the period.

Evotec sees its growth as an affirmation of the company's hybrid business model, which, despite a few setbacks, is on track to deliver long-term value, management said. Last month, Evotec partner Roche ($RHHBY) disclosed that the pair's Alzheimer's disease treatment sembragiline missed its primary goal in a Phase II study, but the company is counting on a bevy of new collaborations to keep Innovate rolling, including deals with Sanofi ($SNY), Bayer and Facio Therapies.

Earlier this year, Evotec inked a cross-cutting deal with Sanofi through which the pharma giant is paying its partner at least €250 million over 5 years to handle much of the heavy lifting in its early-stage pipeline. Through that arrangement, Evotec is tasked with advancing a host of discovery-stage Sanofi candidates toward preclinical development, at which point the French drugmaker will have the option of either taking over each project or finding an outside outfit to buy in. For its trouble, Evotec inherited a long-embattled Sanofi R&D site in France, bringing aboard about 200 new researchers.

- read the statement