Evotec's Q2 2025 Earnings Call: Unpacking Contradictions in R&D, Funding, CapEx, and Working Capital

Shared R&D market dynamics, funding environment for biotech, capital expenditure expectations, and working capital improvement are the key contradictions discussed in Evotec's latest 2025Q2 earnings call.



Revenue and Segment Performance:
- Evotec's group revenues for the first half of 2025 reached EUR 371 million, a 5% decrease from the previous year.
- Discovery & Preclinical Development (D&PD) revenues declined by 11% to EUR 269 million, with a normalized year-on-year decline of 6% excluding the expected BMS revenue decline.
- Just - Evotec Biologics reported EUR 102.2 million in revenue, up 16% year-on-year.
- The differing performance trends are attributed to a soft market in early drug discovery and the growth of the Just - Evotec Biologics business.

Cost Management and Financial Efficiency:
- Evotec reduced its R&D spending by 35%, from EUR 29.3 million in the first half of '24 to EUR 19 million in the first half of 2025.
- The company achieved an FTE reduction of 600 since March 2024, exceeding its original Priority Reset target.
- These cost management efforts are part of the company's strategy to focus resources and achieve cost savings.

Strategic Divestment and Partnership:
- Evotec announced a planned sale of its Toulouse site to Sandoz, including a technology license, with a consideration of around USD 300 million.
- This move aligns with Evotec's strategy to lean into Just - Evotec Biologics' capabilities as a scalable technology provider with an asset-lighter model.
- The transaction is expected to improve Evotec's revenue mix and capital efficiency.

Market Dynamics and Funding Environment:
- The funding environment in biotech remains cautious, with venture capital inflows stabilizing but uneven distribution between early-stage and later-stage funding.
- Evotec noted a higher negative change in orders at the beginning of Q2, mostly related to scientific reasons, but observed a normalization in the second half.
- The funding pressure and change order dynamics reflect a shift in market behavior, with increased scrutiny on early-stage R&D spending.