HAMBURG (dpa-AFX) - Drug discovery company Evotec significantly cut its revenue and operating profit targets following a hacker attack. Industry insiders spoke of a "harsh profit warning," and the stock plummeted. Management is now responding with a multi-million dollar savings program. In a conference call with analysts on Friday, Group CEO Werner Lanthaler was optimistic, promising that Evotec would emerge from the current situation "even stronger."

The company has started the year with "significant progress," the manager emphasized, referring to several large and potentially very lucrative partnerships signed only this year, including with Bristol Myers Squibb and Novartis subsidiary Sandoz. In addition, Evotec delivered "excellent results" in the first quarter, and the setback in the second quarter due to the hacker attack was of a temporary nature.

He sees the group continuing on a good path to its medium-term goals by 2025, thanks in part to its flourishing business with large pharmaceutical groups. This is also to be ensured by "further optimization measures that will take effect in the course of the coming year," as the group had already announced the previous evening.

On the stock exchange, however, investors were less than pleased before the weekend: the share recently slipped by more than four and a half percent in morning trading. According to analyst Charles Weston of Canadian bank RBC, the new annual targets harbor a 40 percent downside potential for market expectations of operating earnings (Ebitda).

Although the stock has gained almost half this year, it had fallen sharply last year after soaring to record levels of over 45 euros in some cases during the height of the pandemic. Currently, the share price is just over 22 euros.

Evotec had to leave the MDax due to the delayed publication of the audited annual report for 2022 as a result of the cyber attack, but was allowed to return promptly in June. In day-to-day business, however, the attack had much longer-lasting and serious consequences for the Group: In early April, the group shut down all systems connected to external sources. "Evotec was able to assure its partners that the integrity of scientific data was not compromised," it said. It cost the Hanseatic company around 25 million euros to deal with the impact of the attack. Operations reportedly resumed at the end of April, but the group continued to lag behind in productivity recently.

"Lower productivity during the second quarter significantly impacted our first-half financial results," Lanthaler said. Currently, however, 90 percent of all systems are already back in full operation, according to the manager - everything should then be as it was by the end of 2023, but until then some external approvals were still missing in the drug development business.

To cushion the impact of the attack, immediate cost-cutting measures have been initiated, said Chief Financial Officer Laetitia Rouxel. A total potential of 25 million euros has been identified, she said. Some of the savings, she said, are permanent and are designed to last beyond 2023.

For example, Evotec is cutting back on administration and sales. In addition, research expenditures will be reduced and Evotec intends to focus on capacity building. On the other hand, Evotec's US subsidiary, Evotec Just Biologics, will invest more in building up its biologics production facility, which is seen as a great source of hope for the Hanseatic company, according to the Evotec CEO.

The cyber attack had caused a net revenue loss of around 70 million euros in the second quarter. The company hopes to recoup some of this this year. "We have great catch-up potential in milestone payments in the third and fourth quarters," the Evotec CEO said.

However, general market conditions are unlikely to improve for the rest of the year, management estimates. Evotec is feeling this especially in drug development. Here, partners such as biotech companies are receiving less funding after the hype in the pandemic. However, this area only accounts for a part of Evotec's own business, the long-term growth trends remain "very healthy" and Evotec's order book is strong, Lanthaler emphasized.

According to the new forecast, however, sales are likely to reach only 750 to 790 million euros in 2023. In a worst-case scenario, that would be only about the same as the year before. Previously, 820 to 840 million had been on the cards.

In terms of earnings before interest, taxes, depreciation and amortization (Ebitda), adjusted for special effects, management expects a significant decline to 60 to 80 million euros. For 2022, Evotec had reported just under 102 million euros and originally intended to increase this result to 115 to 130 million. For the current year, management expects one-time costs of more than 90 million euros.

For the first quarter, Evotec reported a revenue increase of more than 30 percent to over 210 million euros. So far, the Group has not commented on the financial figures for the start of the year. For the first six months, management expects a net loss of more than 370 million euros. Evotec plans to publish its half-year results on August 29./tav/mne/jha/