Evotec takes up legal arms after Andromeda fallout

Risk-sharing researcher Evotec wants what it's due, mounting a legal challenge to reclaim some outstanding royalties after a biotech buyout scandal left it high and dry.

The German company held royalty rights to a diabetes treatment at the center of Hyperion Therapeutics' ($HPTX) $570 million deal for Andromeda Biotech. Earlier this month, Hyperion revealed that it was halting all work on the treatment, DiaPep277, after discovering that Andromeda employees had manipulated data on the drug.

Evotec had nothing to do with DiaPep277's development but, through a 2010 acquisition of DeveloGen, entered into an existing deal that guaranteed it royalty rights and milestone payments. That amounts to more than $4 million in outstanding funds, the company said, and now Evotec intends to "take legal steps" against Andromeda to recover damages.

Upon first learning of the DiaPep277 issue, Evotec advised that it might struggle to meet its full-year revenue goals. The company isn't speculating on how long its new legal challenge will take, or how likely it is to be successful.

The company grew about 9% in the first half of 2014, bringing in $53.6 million in revenue. For the full year, Evotec expects high single-digit percentage growth in revenue, using some recent deals and acquisitions to flesh out sales as it expands in both its contracting and in-house operations.

Evotec splits its business into two halves: EVT Execute, which operates like a CRO, and EVT Innovate, which out-licenses internally developed candidates. The former half largely pays the bills, thanks to risk-sharing deals with the likes of Bayer, Johnson & Johnson ($JNJ) and Roche ($RHHBY), but Evotec has taken strides to build up its internal efforts, in March buying up a biopharma asset management company to bring in a pipeline of its own and get to work on some unpartnered assets.

- read the statement (PDF)