Idera Pharmaceuticals Reports Translational Data Supporting the Mechanism of Action of Intratumoral IMO-2125 from Ongoing Phase 1 Dose Escalation in Clinical Trial in Combination with Ipilimumab in Metastatic Melanoma Patients Refractory to Anti-PD-1 Treatment

On November 11, 2016 Idera Pharmaceuticals, Inc. (NASDAQ:IDRA), a clinical-stage biopharmaceutical company developing toll-like receptor and RNA therapeutics for patients with cancer and rare diseases, is reporting translational data supporting the mechanism of action of intratumoral IMO-2125, a Toll-like receptor (TLR) 9 agonist from the ongoing Phase 1 dose escalating clinical trial (Press release, Idera Pharmaceuticals, NOV 11, 2016, View Source;p=RssLanding&cat=news&id=2221857 [SID1234516527]). In this trial, IMO-2125 is being evaluated in combination with ipilimumab for treatment of patients with metastatic melanoma with disease that is refractory to anti-PD-1 inhibitors, and have minimal options and low expectation of clinical response with ipilimumab treatment alone. Taken together, the previously reported early clinical responses and the supporting mechanism of action translational data being presented today, indicate that intratumoral IMO-2125 is a potent agent for the stimulation of the tumor microenvironment.

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In the oral presentation at the 2016 Society for Immunotherapy of Cancer (SITC) (Free SITC Whitepaper) Annual Meeting (SITC) (Free SITC Whitepaper), entitled "Reactivating the anti-tumor immune response by targeting innate and adaptive immunity in a phase I/II study of intratumoral IMO-2125 in combination with systemic ipilimumab in patients with anti-PD-1 refractory metastatic melanoma," Cara Haymaker, Ph.D., from the University of Texas, MD Anderson Cancer Center, presented an overview of the modulation of the tumor microenvironment through the unique mechanism of action of intratumoral IMO-2125 and provided an update on the initial findings of the translational data through the first cohorts of the trial. Immunological analysis of the biopsy taken from the lesion injected with IMO-2125 showed rapid dendritic cell maturation which is a critical first step in the induction of the immune cascade within the tumor microenvironment. During the treatment period, T-cell expansion and activation and importantly, immune infiltration was observed in the biopsied distant lesions of the responding patients, demonstrating the abscopal effect.

From a clinical perspective, through all dosing cohorts tested to date, no dose-limiting toxicity has been seen. Preliminary clinical activity is also encouraging in this population with disease that is refractory to PD-1 inhibitors as 3 responses (including one CR) have already been recorded. The trial continues to dose escalate and enrollment into the planned anti-PD-1 inhibitor combination arm has also commenced.

"We hypothesized that the intratumoral injection of IMO-2125 into a single tumor lesion would stimulate dendritic cells to produce interferon and the downstream immune cascade in the tumor microenvironment, resulting in the recruitment and activation of tumor-killing T-cells in both the injected and non-injected tumors," said Joanna Horobin, M.B., Ch.B., Idera’s Chief Medical Officer. "When combined with a systemic checkpoint inhibitor, this change in the tumor microenvironment was expected to affect tumor responses in both injected and distant tumors. Today Dr. Haymaker presented analyses of serial biopsies from the tumors of patients with anti-PD-1 refractory melanoma in our ongoing phase 1 dose escalation trial of intratumoral IMO-2125 which clearly demonstrated these beneficial changes in the tumor microenvironment, essentially turning "cold" tumors "hot" in responding patients. We are thrilled to see what we believe to be, the clear translation of our hypothesis in patients. Moreover, in three patients the investigator has reported substantial tumor shrinkage with 2 partial and one complete response."

A copy of the slides from today’s presentation as well as a copy of a related poster presentation are currently available on Idera’s corporate website at View Source

These early results are from the phase 1 portion of study IMO-2125-204 (NCT02644967) in which cohorts of patients with metastatic melanoma unresponsive to PD-1 inhibitor therapy are being administered escalating doses of IMO-2125 ranging from 4 mg/kg through 32 mg/kg. IMO-2125 is injected intra-tumorally into a designated tumor lesion together with a standard dosing regimen of ipilimumab. The trial has recently been amended to also study the combination of IMO-2125 and pembrolizumab given intravenously. Following determination of the recommended phase 2 doses (RP2D) additional patients will be treated in an expansion phase 2 portion of the study. The primary objective of the phase 1 portion of the trial is to characterize the safety and determine a RP2D of IMO-2125 when administered intra-tumorally in combination with ipilimumab or pembrolizumab. The primary objective of the phase 2 portion is to assess the clinical activity of IMO-2125 in each combination at the respective RP2Ds. Assessment will be based on the immune-related response criteria (irRC) and additionally the traditional RECIST criteria. Serial biopsies are being taken of selected injected and non-injected tumor lesions to assess immune changes and correlate with clinical response assessments. The trial will enroll approximately 60 patients. The study is being conducted at MD Anderson and is being led by Adi Diab, MD, Assistant Professor, Department of Melanoma Medical Oncology, Division of Cancer Medicine, MD Anderson as part of a strategic research alliance announced by Idera and MD Anderson in 2015.

Additionally at SITC (Free SITC Whitepaper), on November 9th, Idera’s Oncology Lead, Mark Cornfeld, M.D., M.P.H., presented an overview of IMO-2125’s unique mechanism of action in an oral presentation, entitled "IMO-2125, An Investigational Intratumoral Toll-Like Receptor 9 Agonist, Modulates the Tumor Microenvironment to Enhance Anti-Tumor Immunity" during a session focused on New Clinical Agents in Development. A copy of the slides from this presentation is currently available on Idera’s corporate website at View Source

About Toll-like Receptors and Idera’s Immuno-Oncology Research Program

Toll-like receptors (TLRs) play a central role in the innate immune system, the body’s first line of defense against invading pathogens, as well as damaged or dysfunctional cells including cancer cells. The innate immune system is also involved in activating the adaptive immune system, which marshals highly specific immune responses to target pathogens or tissue. Cancer cells may exploit regulatory checkpoint pathways to avoid being recognized by the immune system, thereby shielding the tumor from immune attack. Checkpoint inhibitors such as agents targeting CTLA4 or programmed cell death protein 1 (PD1) are designed to enable the immune system to recognize tumor cells. In this setting, intra-tumoral TLR9 agonist administration may increase the tumor-infiltrating lymphocytes (TILs), and thereby potentiate anti-cancer activity of checkpoint inhibitors in the injected tumor as well as systemically.

Idera’s TLR9 agonists, IMO-2125 and IMO-2055, have been created using the company’s proprietary chemistry-based discovery platform. IMO-2125 has been shown in various scientific presentations and publications to activate dendritic cells and induce interferon. Idera selected IMO-2125 to advance into clinical development in combination with checkpoint inhibitors based on this immunological profile. In previously completed clinical trials, subcutaneous administration of IMO-2125 was generally well tolerated in about 80 patients with hepatitis C. Idera has conducted further preclinical research evaluating the potential of IMO-2125 to enhance the anti-tumor activity of other checkpoint inhibitors in cancer immunotherapy with data being presented at several medical conferences during the past twelve months. The posters from these presentations can be found at View Source

About Metastatic Melanoma
Melanoma is a type of skin cancer that begins in a type of skin cell called melanocytes. As is the case in many forms of cancer, melanoma becomes more difficult to treat once the disease has spread beyond the skin to other parts of the body such as by through the lymphatic system (metastatic disease). Melanoma accounts for only one percent of skin cancer cases, but causes a large majority of skin cancer deaths. The American Cancer Society estimates that in 2016, there will be 76,380 new cases of melanoma in the U.S., and about 10,130 will die of this disease.

OncoSec Presents Positive Interim Response Data at the Society for Immunotherapy of Cancer (SITC) Annual Meeting 2016

On November 11, 2016 OncoSec Medical Incorporated ("OncoSec") (NASDAQ: ONCS), a company developing DNA-based intratumoral cancer immunotherapies, reported new clinical data from a Phase II Investigator Sponsored Trial led by the University of California, San Francisco (UCSF) (Press release, OncoSec Medical, NOV 11, 2016, View Source [SID1234516530]). The data was presented today at an oral poster presentation (#466) by Dr. Alain Algazi at the Society for Immunotherapy of Cancer (SITC) (Free SITC Whitepaper) ("SITC") Annual Meeting in National Harbor, MD.

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This single-arm, open-label trial assessed the combination of OncoSec’s investigational intratumoral therapy, ImmunoPulse IL-12, and Merck’s KEYTRUDA (pembrolizumab) in patients with unresectable metastatic melanoma. A predictive biomarker was used to enroll patients that have a low likelihood of response to an anti-PD1 agent alone, and the purpose of the trial is to assess whether the addition of ImmunoPulse IL-12 can increase response rates in these patients.

The full-text abstract is available and can be viewed on SITC (Free SITC Whitepaper)’s website at www.sitcancer.org. The poster presentation and handout showing the data of the 40% overall response rate (ORR) in patients predicted not to respond to pembrolizumab are available in the Publications section of OncoSec’s website.

For more information about this trial, please visit: View Source;rank=3

NanoString Technologies Teams with the OHSU Knight Cancer Institute to Develop Myeloid Gene Expression Panels to Advance Immuno-Oncology Research

On November 10, 2016 NanoString Technologies, Inc. (NASDAQ:NSTG), a provider of life science tools for translational research and molecular diagnostic products, reported a new myeloid gene expression collaboration to expand the company’s immuno-oncology portfolio (Press release, NanoString Technologies, NOV 10, 2016, View Source [SID1234516482]). The Company, in conjunction with Lisa Coussens, Ph.D., Professor & Chair, Developmental & Cancer Biology Department, OHSU Knight Cancer Institute, Portland, Oregon, is developing two new myeloid focused research panels for the study of the innate immune response to cancer. An early version of the Myeloid Innate Immunity Panel will be made available to Dr. Coussens and her collaborators, as well as the Stand Up To Cancer – Lustgarten Foundation Pancreatic Dream Team members in an exclusive, advance offering during the month of November in conjunction with Pancreatic Cancer Awareness Month, after which the panels will be available to all researchers.

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"I am thrilled to be partnering with NanoString to create these novel myeloid-focused panels," said Coussens. "We anticipate that through these efforts, we will enable a more complete understanding of the local interplay between myeloid immune components and neoplastic cells in tumors."

Myeloid cells play a key role in modulating activities fundamental to cancer development and are known to have both tumor promoting and anti-tumor functions. As myeloid cells are affected by and can have an impact on many types of cancer therapy, they are broadly applicable within immuno-oncology research. A heightened awareness of the importance of the mechanisms of immunotherapy resistance has brought the myeloid immune response into focus as a key modulator of the adaptive immune response. NanoString is currently working with Coussens on her efforts in understanding recruitment of myeloid cells into neoplastic tissue, and the subsequent regulation exerted by those myeloid cells on neoplastic cells and other cells within dynamic tumor microenvironments.

The Myeloid Innate Immunity panel includes approximately 700 genes representing all major categories of myeloid cells, enabling quantitative evaluation of heterogeneous myeloid cell populations based on recruitment, differentiation, maturation status, and functional activities. The panels are optimized to work across a range of sample types including fresh frozen tissues, formalin-fixed paraffin-embedded (FFPE) samples, peripheral blood mononuclear cells and cell lysates.

"It has been a pleasure to collaborate with Dr. Coussens and we are excited to share this work with the broader community of cancer researchers. The Myeloid panel is a collection of genes that encompass the many characteristics of the innate immune response that will help advance cancer research with obvious applications in infectious disease as well," said Joseph Beecham, Ph.D., senior vice president of R&D at NanoString. "These myeloid panels are highly complementary to NanoString’s 770 gene PanCancer Immune Profiling Panel, layering a unique dimension of gene expression information that will provide insights into the modulation activities of the innate immune response."

Dr. Coussens is chair of the Department of Cell, Developmental & Cancer Biology at OHSU. Her research is focused on revealing the role that immune cells play in regulating solid tumor development. Coussens is a principal investigator on the Stand Up To Cancer – Lustgarten Foundation Pancreatic Cancer Convergence Dream Team in which her work is focused on clinical evaluation of immune-based therapies in pancreatic cancer. She has received numerous awards, including: the V Foundation Scholar Award, the AACR (Free AACR Whitepaper)-Women in Cancer Research Charlotte Friend Memorial Lectureship, and the 2015 recipient of the 13th Rosalind E. Franklin Award from the National Cancer Institute.

This is the latest in a series of research partnerships NanoString has with global leaders in immuno-oncology. NanoString and Coussens will be presenting independently at the upcoming Society for Immunotherapy of Cancer (SITC) (Free SITC Whitepaper) conference taking place Wednesday, November 9 through Sunday, November 13 at the Gaylord National Hotel & Convention Center in National Harbor, Maryland.

Results from NanoString’s previously announced collaborations with Merck and MD Anderson Cancer Center will also be presented this week at AMP and SITC (Free SITC Whitepaper).

– Title: Beyond PD-L1 IHC: A Gene Expression Based Test in development for anti-PD-1 response on the nCounter Dx Analysis System
– Speaker: Dr. Matthew Marton, Director of Genomics and Companion Diagnostics, Merck
– Date/time: Wednesday, November 9th, 8 AM – 9 AM.

– Title: The increasing clinical relevance of predictive biomarkers in cancer immunotherapy: can we afford to move forward without them?
– Speakers: Alessandra Cesano, Alex Rueben (MDACC) & Jared Lunceford (Merck).
– Date/time: Saturday, November 12th, 12:00 PM – 1:00 PM.

ImmunoCellular Therapeutics Announces Third Quarter 2016 Financial Results and Provides Research and Development Update

On November 10, 2016 ImmunoCellular Therapeutics, Ltd. ("ImmunoCellular") (NYSE MKT: IMUC) reported financial results for the third quarter of 2016 and provided an update on its research and development activities (Press release, ImmunoCellular Therapeutics, NOV 10, 2016, View Source [SID1234516541]).

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Andrew Gengos, ImmunoCellular’s Chief Executive Officer, commented: "During the third quarter and year to date, we continued to implement our ICT-107 registration trial in patients with newly diagnosed glioblastoma, and conduct our phase 1 trial of ICT-121 in patients with recurrent glioblastoma. Today, in our ICT-107 phase 3 trial, about 225 patients have been screened, 11 have been randomized, and clinical site activation is continuing, with a total of 66 sites activated to date. We have determined that the number of patients who complete screening and then proceed to randomization, post-chemoradiation, is lower than expected, and thus the rate of randomization is slower than we would like. To address this challenge, we are implementing a protocol amendment for the ICT-107 trial that will modify some elements of how patients qualify for the trial, which is designed to accelerate the pace and efficiency of randomization. We also anticipate increasing the target number of randomized patients, which would extend the timeline to trial completion. We are continuing to screen and randomize patients, and anticipate completing the amendment process in the first quarter of 2017."

Continued Mr. Gengos: "The phase 1 open-label trial of ICT-121 being conducted at six sites in the U.S. completed enrollment of 20 patients in the third quarter. The preliminary results thus far are encouraging, showing a current median survival of 13.8 months as of October 31st, seven patients who are alive beyond 18 months, and four patients who are alive at the two-year mark. We are continuing to monitor outcomes, with the goal of having preliminary data by mid-2017, potentially in time for the ASCO (Free ASCO Whitepaper) 2017 meeting. We are grateful for the continued support of the medical and scientific cancer community for our clinical programs, and the confidence placed in our company by our collaborators."

Achievements, Upcoming Goals and Milestones:

ICT-107:
Continue to bring U.S., Canadian and European clinical sites online. A total of 75 site initiation visits have been completed, and 66 sites have been activated to date.
A protocol amendment is underway, which will modify some elements of how patients qualify for the trial, raise the target number of randomized patients from 414 to at least 500 and result in a potential 12 to 18 month extension to complete the trial. We now anticipate randomization of all patients to be completed by the first half of 2019, and an additional 2-3 years from then to achieve the number of required events.
Plan to conduct a futility interim analysis at 30% of events, or at about the time of full randomization, and an efficacy interim analysis at 67% of events, about six months later.
Present updated immune monitoring data from the ICT-107 phase 2 trial and updated long-term survival data from the phase 1 trial at the 2016 Society for NeuroOncology annual scientific meeting, being held in Scottsdale, AZ in two oral presentations.
Friday, November 18, 4:35 pm MT, Adult Clinical Trials – Immunological (ATIM-19) "Categorizing immune responders with fusion metrics and simulation for association to survival and progression-free survival with immune response in HLA-A2+ patients with GBM from a phase 2 trial of dendritic cell (DC) immunotherapy (ICT-107)," presented by Steven J. Swanson, PhD, ImmunoCellular Therapeutics, Ltd, Calabasas, CA.
Friday, November 18, 4:40 pm, MT, Adult Clinical Trials – Immunological (ATIM-25): "Ten-year follow up with long term remission in patients with newly diagnosed glioblastoma (GBM) treated with ICT-107 vaccine (phase 1)," presented by Surasak Phuphanich, MD, Neuro-Oncology Program, Department of Neurosurgery & Neurology, Cedars-Sinai Medical Center, Los Angeles, CA
ICT-121:
Continuing to monitor patients, with data expected around mid-2017.
Research:
Anticipate having one or more T cell receptors identified for a Stem-to-T-cell clinical candidate or candidates by year-end 2016.
Initial attempt to package a T cell receptor DNA sequence in the lentivirus/gene therapy construct by year-end 2016.
Continued progress in collaboration with University of Maryland on projects that have application to existing dendritic cell immunotherapy and Stem-to-T-cell technology platforms.
Third Quarter 2016 Financial Results

For the quarter ended September 30, 2016, ImmunoCellular incurred a net loss of $4.8 million, or $0.04 per basic and diluted share, compared to a net loss of $3.4 million, or $0.04 per basic and diluted share, for the quarter ended September 30, 2015.

During the third quarter 2016, ImmunoCellular incurred $4.6 million of research and development expenses compared to $2.7 million in the prior year quarter, while general and administrative expenses decreased to $908,000 compared to $1.1 million in the prior year. The $1.9 million increase in research and development expenses primarily reflects the additional expenses associated with the phase 3 trial of ICT-107. The decrease in general and administrative expenses reflects lower professional fees in the current quarter.

The loss for the current quarter was partially offset by a $1.1 million credit to other income to reflect a reduction in the valuation of the Company’s warrant derivative liabilities. In the same quarter of the prior year, the Company recorded a corresponding credit of $339,000.

For the nine months ended September 30, 2016, ImmunoCellular incurred a net loss of $15.8 million, or $0.15 per basic and diluted share, compared to a net loss of $8.0 million, or $0.09 per basic and diluted share. During the nine months ended September 30, 2016, ImmunoCellular incurred $13.7 million in research and development expenses compared to $7.0 million in the prior year.

ImmunoCellular also reported that cash used in operations during the nine months ended September 30, 2016 was $16.1 million compared to $13.2 million in the prior year. The increase primarily reflects the additional research and development expenditures in the current year. As of September 30, 2016, ImmunoCellular had $15.3 million in cash.

In August 2016, the Company entered into an underwriting agreement with Maxim Group LLC, pursuant to which the Company received net proceeds of approximately $6.6 million (after deducting the underwriting discount and offering expenses) from the initial sale of 34.6 million shares of the Company’s common stock, base warrants to purchase 35,250,000 shares of common stock at an exercise price of $0.1921 per share, and pre-funded warrants to purchase 12,450,000 shares of common stock at an exercise price of $0.01 per share. The underwriters partially exercised their option to purchase additional shares and base warrants and purchased an additional 1,500,000 million shares of the Company’s common stock at a price of $0.15 per share and base warrants to purchase 4,478,625 shares. The pre-funded warrants were substantially paid for at the time of the offering and have an exercise price of $0.01 per share. As of September 30, 2016, the Company had 137,795,802 shares of common stock issued and outstanding.

Additionally, the terms of the California Institute of Regenerative Medicine (CIRM) award were modified such that ImmunoCellular received an additional $1.5 million in August 2016 as part of the initial award received from CIRM. The total amount of the award and other award conditions remain unchanged.

Evotec AG reports results of first nine months of 2016

On November 10, 2016 Evotec AG (Frankfurt Stock Exchange: EVT, TecDAX, ISIN: DE0005664809) reported financial results and corporate updates for the first nine months of 2016 (Press release, Evotec, NOV 10, 2016, View Source [SID1234516586]).

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FINANCIAL PERFORMANCE – PROFITABLE AND STRONG GROWTH

– Strong revenue growth in both operating segments:

EVT Execute revenues up 36% to EUR 126.6 m;
EVT Innovate revenues up 26% to EUR 17.9 m
– Consolidated Group revenues up 37% to EUR 120.6 m (9M 2015: EUR 88.2 m); base revenues up 30% to EUR 105.0 m

– Adjusted Group EBITDA increased to EUR 30.6 m (9M 2015: EUR 3.4 m)

– R&D expenses of EUR 12.8 m

– Strong liquidity position of EUR 120.0 m despite loan repayments

EVT EXECUTE – STRONG OPERATIONAL PERFORMANCE

– Significant milestone achievements in Bayer, Boehringer Ingelheim and Padlock collaborations

– Phase I clinical start for the treatment of endometriosis with Bayer

– Extensions of ongoing collaboration, e.g. with Genentech and Janssen Pharmaceutica NV

– New long-term strategic drug discovery alliances, e.g. with C4X Discovery, Antibiotic Research UK, UCB

– New compound management partnerships, e.g. with Pierre Fabre and UCB

– New licences enhancing existing drug discovery platform, e.g. with CRISPR/Cas9 and Trianni

– Proposed acquisition of ADME-Tox and DMPK specialist company Cyprotex PLC (after period-end)

EVT INNOVATE – NEW PATHS OF ACCELERATING FIRST-IN-CLASS DRUG DISCOVERY

– New multi-target alliance with Bayer in kidney diseases

– First research collaboration under French Academic Bridge with Inserm in oncology

– Acceleration of TargetNASH programme with Ellersbrook GmbH & Co. KG

– Innovation partnership with ex scientia to develop bispecific small molecule immuno-oncology therapeutics

– Formation of spin-off company Topas Therapeutics GmbH in the field of nanoparticle-based therapeutics to treat immunological disorders

– Participation in Series A funding of Carrick Therapeutics

– Establishing of EVT BRIDGE LAB282 partnership with Oxford University, OSI and OUI (after period-end)

ALL ELEMENTS OF GUIDANCE CONFIRMED – PROFITABILITY GUIDANCE RAISED IN JULY 2016

– Adjusted Group EBITDA (before changes in contingent consideration) expected to more than double compared to 2015

– All other elements of financial guidance as of 22 March 2016 and positive outlook confirmed

– Strong initial outlook for 2017

1. FINANCIAL PERFORMANCE

PROFITABLE AND STRONG GROWTH

Evotec’s Group revenues for the first nine months of 2016 grew to EUR 120.6 m, an increase of 37% compared to the same period of the previous year (9M 2015: EUR 88.2 m). This increase is due to growth in the core EVT Execute business, a full nine month contribution of the Sanofi collaboration as well as significant milestone payments. Excluding milestones, upfronts and licences, Evotec’s base revenues for the first nine months of 2016 were EUR 105.0 m and increased by 30% over the same period of the previous year (9M 2015: EUR 80.7 m). The gross margin in the first nine months of 2016 was strong at 38.5% and improved over the first nine months of 2015 (9M 2015: 27.2%). The margin increase over 2015 is attributable to the same drivers as the trend in revenue growth as well as capacity utilisation and favourable foreign exchange rate effects.

R&D expenses for the first nine months of 2016 decreased by 5% to EUR 12.8 m (9M 2015: EUR 13.5 m) due to successful partnering of EVT Innovate projects in 2015. Total SG&A expenses for the first nine months of 2016 decreased by 7% to EUR 17.8 m (9M 2015: EUR 19.0 m). SG&A expenses in 2015 included one-time M&A and related costs. Adjusted Group EBITDA in the first nine months of 2016 increased significantly to EUR 30.6 m (9M 2015: EUR 3.4 m). Evotec’s operating result for the first nine months of 2016 amounted to EUR 20.4 m (9M 2015: EUR 12.3 m).

Liquidity, which includes cash and cash equivalents (EUR 62.4 m) and investments (EUR 57.6 m) amounted to EUR 120.0 m at the end of September 2016 (31 December 2015: EUR 133.9 m). In Q2 2016, Evotec initiated the repayment of loans, which was continued in Q3 2016.

Revenues from the EVT Execute segment amounted to EUR 126.6 m in the first nine months of 2016, an increase of 36% compared to the prior-year period (9M 2015: EUR 93.4 m). Included in this amount are EUR 23.9 m of intersegment revenues (9M 2015: EUR 19.5 m). The EVT Innovate segment generated revenues in the amount of EUR 17.9 m consisting entirely of third-party revenues (9M 2015: EUR 14.3 m). The increase in revenues resulted from EVT Innovate projects which were partnered in 2015. Gross margin for EVT Execute amounted to 32.9% while EVT Innovate generated a gross margin of 45.6%. R&D expenses for the EVT Innovate segment at EUR 16.3 m in the first nine months of 2016 remained largely unchanged (9M 2015: EUR 16.6 m). Due to growth in the base business, milestone achievements and three full quarters of the Sanofi contribution, the adjusted EBITDA of the EVT Execute segment amounted to EUR 41.3 m in the first nine months of 2016 and increased significantly compared to EUR 16.1 m in the prior-year period. The EVT Innovate segment reported an improved adjusted EBITDA of EUR (10.7) m (9M 2015: EUR (12.7) m).

2. EVT EXECUTE & EVT INNOVATE

EVT EXECUTE – STRONG OPERATIONAL PERFORMANCE

During the first nine months of 2016, EVT Execute demonstrated a strong operational performance, shown also by important milestones achievements in its collaborations with Bayer, Boehringer Ingelheim and Padlock. Furthermore, Evotec was able to announce the progression of a first programme from its strategic alliance with Bayer in the field of endometriosis into Phase I clinical development. In addition, the compound management business is gaining momentum, underlined by new alliances with UCB and Pierre Fabre. Various collaborations were extended in the first nine months of 2016, such as the drug discovery alliances with Genentech and Janssen Pharmaceutica NV. Additionally, Evotec was able to enter new drug discovery alliances with C4X Discovery, UCB and Antibiotic Research UK, the latter underlining the recent trend of an increasing number of non-governmental organisations and foundations accessing Evotec’s drug discovery platforms.

Consistent with the Company’s strategy to offer its clients the most advanced technological platforms, Evotec continued to expand its drug discovery platforms, e.g. with a non-exclusive licence to the leading technology on the market for gene editing (CRISPR-Cas9 licence) and Trianni’s next-generation transgenic technology. Along these lines, Evotec announced the proposed acquisition of Cyprotex PLC after period-end, which would add world-leading high-quality ADME-Tox services and strengthen Evotec’s leadership in drug discovery. This proposed acquisition, which has been unanimously recommended by the board of Cyprotex, is expected to close before year-end 2016.

EVT INNOVATE – NEW PATHS OF ACCELERATING FIRST-IN-CLASS DRUG DISCOVERY

The EVT Innovate portfolio continued to make very good scientific and commercial progress in the third quarter of 2016, resulting in a very strong performance of the segment. EVT Innovate again demonstrated its ability to partner promising early-stage scientific approaches with Pharma companies with the start of a five-year, multi-target alliance with Bayer in the field of kidney diseases based on assets from its CureNephron portfolio. Furthermore, the Company entered into its first research collaboration under its French Academic Bridge with Inserm in the field of oncology. In addition, EVT Innovate is accelerating its TargetNASH programme together with Ellersbrook GmbH & Co. KG, with both partners committed to investing up to EUR 5 m over an initial three-year period. An innovation partnership with ex scientia (UK) to develop bispecific small molecule immuno-oncology therapeutics was formed.

In March 2016, Evotec announced the formation of a spin-off company called Topas Therapeutics GmbH, focused in the field of nanoparticle-based therapeutics to treat autoimmune diseases. The establishment of Topas is the first example of the acceleration of Evotec’s business model to take advantage of carving out or investing in promising programmes with additional upside potential. In addition, Evotec announced an investment of up to $ 6 m towards Carrick Therapeutics’ latest $ 95 m funding round, thereby deepening its already existing relationship with Carrick.

EVT Innovate is also pursuing new approaches in scouting new innovations and accelerating them along the drug discovery value chain. After period-end, Evotec announced a highly innovative strategic partnership called "LAB282" with the University of Oxford, Oxford University Innovation Ltd and Oxford Sciences Innovation aimed at accelerating the translation of basic biomedical research from Oxford into new clinical therapeutics. These efforts, referred to as "EVT BRIDGE", are focused on highly capital efficient translation of academic science into potentially transformative pharmaceutical projects.

3. ALL ELEMENTS OF GUIDANCE CONFIRMED

PROFITABILITY GUIDANCE RAISED IN JULY 2016

Evotec’s financial guidance was last updated in July 2016 due to an increased margin contribution and a positive outlook for the remainder of the year.

Guidance July 2016 Original Guidance 2016 Actual 2015

Group revenues1)

More than 15% growth

More than 15% growth
EUR 115.4 m
Adjusted Group EBITDA2)
More than double Positive and significantly improved compared to prior year EUR 8.7 m
R&D expenses Approx. EUR 20 m Approx. EUR 20 m EUR 18.3 m

Liquidity3)
Similar level compared
to 2015

Similar level compared to 2015 EUR 134.5 m
Capex investments Up to EUR 10 m Up to EUR 10 m EUR 11.2 m
1) Excluding milestones, upfronts and licences
2) Before contingent considerations, income from bargain purchase and excluding impairments on goodwill, other intangible and tangible assets as well as the total non-operating result
3) Excluding any potential cash outflow for M&A or similar transactions