Evotec to acquire DeveloGen

Jul 15 2010

• Adds Key Metabolic Disease Know-How and Complementary Drug Discovery Expertise
• Adds Two High-Value Alliances With Boehringer Ingelheim and Andromeda (Teva)
• Purchase Price Includes Up To €14m In Shares, Thereof Approx. €6m (In Shares) Conditional, Plus a Future Earn-Out In Cash
• Despite Cash Requirements and Transaction Costs of Approx. €2m Liquidity Guidance of More Than
  €64m By Year-End Confirmed
• Evotec Appoints Dr Cord Dohrmann as Chief Scientific Officer and Member of Evotec's Management Board

Evotec AG (Frankfurt:EVT) (TecDAX) today announced the signing of a definitive agreement to acquire DeveloGen, a biopharmaceutical company engaged in the discovery of novel therapeutic approaches for the treatment of metabolic and endocrine disorders, for up to €14m in shares plus performance-related deferred payments (earn-out).

Broadening Evotec's portfolio of innovation alliances

The transaction significantly catalyses Evotec's strategy to become the world leading drug discovery and early development partner for pharma and biotechnology companies. It immediately adds two complementary alliances to Evotec's portfolio of core assets:

- An integrated discovery alliance with Boehringer Ingelheim on small molecules to treat insulin resistance (type 2 diabetes). In this performance-based alliance Evotec will receive ongoing research funding and may earn potential milestone payments of up to € 237m for the lead compound as well as royalty payments.

- A development partnership with Andromeda (Teva) on DiaPep277, a synthetic peptide immunomodulator to treat type 1 diabetes in pivotal Phase III clinical development. Evotec may receive royalties upon commercialisation of DiaPep277 products and significant milestones upon the successful completion of key development and regulatory milestones.

Sharpening Evotec's leadership role in drug discovery

The acquisition especially augments and complements Evotec's high-end drug discovery platform and capability with DeveloGen's target discovery, validation and in vivo/in vitro pharmacology expertise and adds core disease biology know-how in metabolic diseases. These skills further enhance Evotec's ability to deliver high quality, innovative solutions to its partners on a global scale.

DeveloGen's growth factor, targeting beta cell regeneration (type 1 and type 2 diabetes), which is in lead optimisation and has been funded by the Juvenile Diabetes Research Foundation, forms also part of the transaction. The most advanced lead, DG770, triggers beta cell proliferation and neogenesis and has demonstrated efficacy and safety in various preclinical models.

"Through the acquisition of core DeveloGen assets and its disease biology know-how in metabolic disorders, Evotec broadens its portfolio of high-value partnerships and adds substantial potential for milestone payments over the next years," said Dr Werner Lanthaler, Chief Executive Officer of Evotec AG. "Importantly, we are acquiring this value potential for our shareholders without assuming many of the risks associated with such transactions. Of the initial purchase price almost half will only be released following the achievement of defined company goals and an earn-out component secures that the additional consideration will only be paid if the programmes acquired generate revenues."

Transaction structure reflects value potential

The purchase price consists of up to € 14m in shares and an earn-out component in cash. The € 14m in shares will be created using Evotec's authorised capital with an attributed value per share of € 2.00. € 8m (4m shares) are issued to the sellers at closing; € 6m (3m shares) are conditional. The respective conditional shares are held in escrow and their release is subject to certain company events and representations. All shares issued are subject to a six months lock-up. In addition, DeveloGen shareholders are eligible for success-based cash payments (earn-out) based on future milestone and royalty income generated from the acquired programmes. Shareholders of 99.3 % of the DeveloGen capital have already signed up to the transaction. The deal is expected to close in August 2010.

Despite cash requirements and transaction costs of approx. €2m resulting from the acquisition, mainly for DeveloGen working capital needs, Evotec confirms all prior financial objectives. For the current fiscal year, the Company expects to grow revenues by more than 15%, to spend approximately € 10 m in R&D and to end the year 2010 with a liquidity of more than € 64 m.

Appointment of new CSO and Management Board member

Evotec appoints Cord Dohrmann, Ph.D., as Chief Scientific Officer and member of the Management Board starting September 1^st 2010. Dr Dohrmann has spent over 20 years in biomedical research at leading academic institutions including the Max-Planck Institute, Harvard Medical School and the Massachusetts' General Hospital. For the last 10 years, Dr Dohrmann served DeveloGen in various management positions including CEO, growing DeveloGen from a start-up to internationally recognised metabolic disease company with a focus on developing highly innovative therapies for diabetes.

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