Evotec SE’s Biologics Surge and Strategic Ambitions: A Deep Dive into FY25 and FY28 Outlook

Evotec SE, a leading drug discovery and development partner, has delivered a resilient Q4 2024 performance, with its Just – Evotec Biologics segment propelling revenue growth despite headwinds in its Shared R&D division. The company’s Q4 results, paired with an ambitious FY25/FY28 strategic roadmap, highlight a pivot toward operational efficiency and technology-driven expansion. This article dissects Evotec’s financial performance, strategic pivots, and risks, offering insights for investors.

Key Financial Highlights: A Tale of Two Segments

Evotec’s Q4 2024 revenue reached €221.2 million, a 10% year-over-year (YoY) increase, driven by its Biologics segment’s 71% YoY surge to €185.6 million. This segment now accounts for ~75% of total group revenue, underscoring its strategic importance. However, the Shared R&D division—a legacy pillar—declined 9% YoY to €611.4 million, reflecting reduced biotech funding and pharma sector restructuring.

The full-year 2024 revenue of €797 million marked a modest 2% growth over 2023, with Adjusted Group EBITDA falling to €22.6 million from €66.4 million in 2023. This drop stemmed from cost-revenue mismatches in Shared R&D, though management emphasized that the Priority Reset initiative—targeting €40 million in annual savings—is on track. Restructuring costs came in lower than expected (€54.9 million vs. a provision of €68.5 million), improving liquidity and reducing net debt leverage to 1.9x net debt/EBITDA.

Strategic Shifts: From Cost Cuts to CAGR Ambitions

Evotec’s FY25 guidance projects 5–10% revenue growth to €840–880 million, with Adjusted EBITDA rebounding to €30–50 million. The outlook hinges on stabilizing Shared R&D and accelerating Biologics. By 2028, the company aims for a 8–12% CAGR in group revenues and an adjusted EBITDA margin exceeding 20%, supported by €50 million in additional savings through operational excellence measures.

Three pillars underpin this strategy:
1. Tech-Driven Innovation: Evotec is doubling down on automation, AI, and next-gen platforms to boost drug discovery success rates. Its partnership with Pfizer (PFE) on metabolic/infectious diseases and Sandoz (SNN) in biologics manufacturing exemplify this focus.
2. Asset Lighter Model: A 30% reduction in unpartnered R&D and exit from non-core equity stakes aim to redirect resources toward high-margin services.
3. Strategic Partnerships: New deals with Bristol Myers Squibb (BMY) in neuroscience and Novo Nordisk (NVO) in cell therapies signal a shift toward deeper, long-term collaborations with big pharma.

Risks and Considerations

While Evotec’s Biologics dominance is a clear strength, risks linger. The Shared R&D division’s decline—driven by external factors like biotech funding cuts—could persist. Geopolitical risks, such as U.S. funding shifts or trade tariffs, are deemed “limited” by management but remain uncertain. Execution risks for the Priority Reset and 2028 targets also loom, given the ambitious savings goals.

Conclusion: A Balancing Act Between Growth and Efficiency

Evotec’s Q4 results and FY25/FY28 outlook reveal a company at a crossroads: leveraging its Biologics engine to offset legacy challenges while reshaping its portfolio for profitability. With a €40 million annual savings target already underway and a €50 million expansion by 2028, the company aims to transform its margins.

The Biologics segment’s 71% YoY growth and partnerships with industry giants like Pfizer and Novo Nordisk suggest strong execution potential. However, investors must weigh this against the 9% drop in Shared R&D and market volatility.

If Evotec can sustain Biologics momentum while stabilizing Shared R&D, its 8–12% CAGR target and >20% EBITDA margin by 2028 could position it as a leader in drug discovery services. For now, the stock—trading at a forward P/E of ~20x (based on 2025 EBITDA estimates)—offers upside if operational levers deliver as promised.

In a sector where R&D efficiency and tech differentiation are critical, Evotec’s strategic recalibration may yet turn today’s challenges into tomorrow’s catalysts.