Evotec

(from NI January 2009)

Evotec has one of the healthier balance sheets in the sector, and has been successful in continuing to derive research service revenues from relationships with Boehringer Ingelheim and Novartis. Pfizer finally advanced their VR-1 candidate into the clinic, although success there is anything but guaranteed given the challenges of that target. But in early December, their CEO departed, and our guess is that this was not his idea. We suspect that the BOD may not be happy with the progress of the Evotec pipeline: a smoking cessation 'craving' trial failed, (though a 'quit rate' Phase II is ongoing); their insomnia drug has not been the partnering asset they hoped it would be. On the other hand EVT101, a NR2b subunit selective NMDA blocker initially aimed at Alzheimer's, passed PhI, and POC studies have been planned for 2009, beginning with pain. A P2X7 anti-inflammatory has reached the clinic. But perhaps more salient in the BOD's view is that Evotec's divestiture of their other operations, and the daring move onto NASDAQ via the acquisition of Renovis, have not paid off in terms of stock valuation, and the Renovis pipeline may turn out to be less valuable than anticipated. Evotec possesses impressive resources in their discovery expertise and cash-on-hand, we will be watching to see how the strategy going forward may now be altered.

(from the July/August 2008 NI)

The Renovis acquisition was finally completed, and Evotec has a lot of cash (by CNS company standards) with which to advance their pipeline. The most advanced clinical program is the EVT-201 GABA-A drug for insomnia, which has shown well in Phase II, and is now on their docket for partnering. The second in line is EVT302, a reversible MAO-B inhibitor in Phase II for smoking cessation. The first Phase II will report this quarter, a second one will report during 1H:09. Pharmacokinetic studies continue with EVT101, which they see as a potential drug for Alzheimer's and pain, we believe the latter is the more likely indication. The long wait for Pfizer to enter Phase I with a VR-1 antagonist was expected to end this half, but the recent adverse event issues that have cropped up around VR-1 and cognition may have slowed that process yet again. Early work in P2X7 and P2X3 antagonists may produce IND readiness next year.

(from the January 2008 NI)

Comment 1: 2007 was a transformative year for Evotec. They divested their non-pharmaceutical development businesses, and with the proceeds, acquired assets from Neuro3D and more importantly, are buying Renovis. In terms of clinical data, they announced positive insomnia data for two POC trials for their GABA-A partial agonist, EVT201, in adult and elderly insomnia populations. EVT101, a NMDA blocker aimed at Alzheimer's, passed PhI, and a PhII initiation is imminent. This might be considered a more selective (NR2B subunit) Namenda, aimed at neuropathic and perioperative pain. A MAO-B inhibitor licensed from Roche entered Phase I, Phase II in smoking cessation is planned for next year, with Alzheimer's cited as a possible indication as well. They will also have over $200 million in cash when the Renovis deal closes in 1Q:08, as well as a Pfizer partnership for the VR-1 pain program, expected to reach the clinic in 2008.

Comment 2: Evotec's more advanced pipeline pursues well-characterized mechanisms. This reduces the risk that they will miss on efficacy, but it remains to be seen whether they can achieve significant improvement upon current options. Evotec's insomnia candidate has shown well in Phase II POC studies, it will be interesting to see what kind of terms can be obtained from a Big Pharma partner. We have some reservations about the NR2B/NMDA blocker mechanism in terms of its competitive position versus the numerous other approaches to neuropathic pain and Alzheimer's. The Renovis pipeline brings in some innovative components and Pfizer as an existing partner, though VR-1 as a target has challenged everyone pursuing it. Evotec's appeal is only partly due to the pipeline it already has, it also relates to the flexibility that its scientific assets and its impressive cash position afford it in terms of further acquisitions or licensing. However, for 2008, and having acquired Neuro3D and Renovis, while divesting major operations to PerkinElmer and Aptuit, they are planning to consolidate and integrate the new elements into Evotec. The NASDAQ listing which will ensue from the Renovis consummation will raise their profile enormously. Given the resources they can bring to bear ($200 million in cash after the Renovis deal closes), Evotec will be in position to eventually carry out further acquisitions, and should be an imposing force in the CNS area.