HAMBURG (dpa-AFX) - Pharmaceutical ingredient developer Evotec continues to struggle with weak demand in the early-stage drug research market. The quarterly results presented in Hamburg on Wednesday fell short of expectations. Meanwhile, its biotech subsidiary Just-Evotec Biologics (JEB) performed better. However, Evotec is now selling JEB to Sandoz, as announced on Tuesday evening--a decision that had been planned since the summer. The completion of the deal initially sparked enthusiasm among investors in pre-market trading. However, during regular trading, operational performance took center stage, and the stock came under pressure.

By late morning, Evotec shares, listed on the SDax, were down around 12 percent. Since the beginning of the year, the stock has experienced several ups and downs, currently showing a 24 percent decline since January.

The financial details of the deal with Sandoz were largely in line with expectations, wrote RBC analyst Charles Weston. However, the third-quarter results clearly disappointed the market.

In the first nine months of the year, Evotec's revenue fell by 7 percent compared to the same period last year, to approximately EUR535 million. The adjusted operating loss (adjusted EBITDA) widened from EUR6 million to nearly EUR17 million. Net loss narrowed somewhat from just over EUR155 million to around EUR118 million, thanks in part to cost-saving measures. The company confirmed its targets for 2025 and 2028.

Evotec cited weak demand in the early drug research (D&PD) market. Revenue in this business segment declined significantly. The strong performance of Just-Evotec Biologics (JEB) only partially offset this decrease. In addition, Evotec is grappling with underutilization and high fixed costs. There are also expenses related to the ramp-up of a JEB facility in Toulouse, France, which is part of the now-finalized sale to Sandoz.

The Swiss company is acquiring 100 percent of JEB shares as well as the license fees for JEB's production technology. According to the information provided, Sandoz will pay a cash sum of approximately $350 million (EUR302 million) for the package. The license covers an unlimited number of molecules, though currently, license fees apply for up to ten molecules.

Additionally, Evotec is entitled to license fees and development revenues--including success-based milestone payments--amounting to around $300 million over the coming years, the statement said. Existing contractual obligations will be replaced as a result.

JEB has been a strategic partner of Sandoz since 2023. By mid-2024, the Basel-based company had also secured access to the Toulouse production facility. With this acquisition, Sandoz aims to expand its internal development and manufacturing capacities in the biosimilars sector. According to the company, market opportunities in this field are estimated at around $300 billion over the next ten years.

The acquisition is also in line with Sandoz's existing investment commitments and will not affect its full-year outlook. Sandoz expects an EBITDA margin of 21 to 22 percent in 2025, while revenue is projected to grow in the mid-single-digit percentage range.