Ladenburg starts Evotec at buy; PT €22.50

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Ladenburg Thalmann initiated coverage of German-based Evotec (FSE:EVT) with a “buy” rating and price target of €22.50. The stock closed at €18.53 on Oct. 3.

Evotec is a global drug discovery and services company that leverages the stability of its profitable services segment (EVT Execute), with the growth potential from its co-owned pipeline of approximately100 novel drug candidates (EVT Innovate).

“Given its expertise, Evotec can often select the projects in which it retains rights either through milestones and royalties or equity ownership of partnered companies,” writes analyst Michael Higgins. “These segments strengthen each other, as all capabilities within EVT Execute are available to EVT Innovate and all learnings from Innovate are incorporated into EVT Execute,” he added.

Mr. Higgins said that given expectations for continued growth in Evotec’s drug discovery operations, which has produced a stable base of more than 750 customers, some 100 co-owned projects, clinical-stage projects and increasingly valuable alliances, “we believe Evotec remains undervalued.”

In addition, he said that over the coming years, “we expect the value of its milestone and royalty payments from partnered projects to rise significantly.”

Stephen Kilmer