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Published to the market and investors on 31^st August 2018 @ 8.42am (London time).

Evotec AG (EVT-DE): Evotec and Centogene join forces in rare diseases
Recommendation: OUTPERFORM
Target Price: EUR25.00 (increased from EUR19.40 / UR)
Current Price: EUR22.09 (COB on 30^th August 2018)

KEY TAKEAWAY

Evotec has signed a global strategic partnership with Centogene AG focused on small molecule drug discovery for rare genetic diseases. This is an exciting opportunity for Evotec with large future upside potential, since (1) rare diseases are one of the fastest growing pharmaceutical markets, (2) the cost of genetic testing has come down rapidly over the last decade, allowing for extensive genetic analyses at low cost, and (3) Centogene, a global leader in genetic testing and big data solutions focused on rare genetic diseases, owns a proprietary mutation database that allows for unique medical and genetic insights both for target and biomarker identification. We increase our target price to EUR25 per share (from EUR19.40 which was under review) and reiterate our OUTPERFORM recommendation. Evotec is uniquely positioned to continue benefiting from the strong pharma outsourcing trend, in our view, based on its highly innovative technology platforms.

Rare / orphan diseases have become a highly sought therapy area

Approximately 7,000 rare diseases have been identified to date, and 2% - 3% of the human population suffers from a rare disease. According to Evaluate Pharma, orphan drug sales are expected to grow to a staggering $290bn by 2022E, representing an 11% 2017-2022E CAGR and accounting for over one-fifth of total prescription drug sales.

Key challenges include small patient numbers, limited data and inadequate models

Although collectively rare diseases are a large therapy area, each disease in itself is represented by very small patient numbers. Hence, the underlying genotype is not well understood for most disease phenotypes. In addition, there is a lack of adequate cellular and experimental models - all of which render drug development a challenging endeavour.

The cost of genetic testing has been falling exponentially

The first full sequence of a human genome, announced in 2001, took about 15 years and cost an estimated $2.7bn. Since then, multiple technological advances including the introduction of next-generation sequencing ("NGS") have led to a rapid decline in sequencing costs. It is now possible to sequence a whole human genome for just over $1,000 in a matter of 2-4 weeks. This has paved the way for an explosion in human genomic information, thus boosting the understanding of rare genetic diseases.

Centogene is a leader in genetic testing and big data analysis

Since being founded in 2005, Centogene AG, a privately held German company, has rapidly established itself as a leading, fully integrated leader in genetic testing for rare diseases. One of its unique selling points is CentoMD, a genotype / phenotype mutation database, which is based on c.180k analysed human cases, has over 3,400 associated phenotypes, and includes over 6.7 million variants. CentoMD represents a powerful tool for the identification of novel drug targets and biomarkers, as well as suitable patients in the context of clinical trials.

Combining Evotec's drug discovery tools with Centogene's rare disease insights

The collaboration will focus on the development of a strategic high-throughput platform to test small molecules for rare metabolic diseases, combining Evotec's drug discovery capabilities - particularly its induced pluripotent stem cell ("iPSC") platform - with Centogene's leading mutation database. To our knowledge, this is the first partnership of its kind, once again demonstrating Evotec's position at the forefront of biopharma innovation, including embracing the increasing role of digitalisation and big data to optimise the utility of technology and resources with the aim of improving R&D efficiency by reducing time and cost of drug discovery whilst increasing the chance of success.

Kind regards,

Brigitte deLima | Analyst

goetzpartners Healthcare Research Team | Research Team

goetzpartners securities Limited

The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK.

T +44 (0) 203 859 7725 | brigitte.delima@goetzpartners.com / healthcareresearch@goetzpartners.com

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