Evotec's Strategic Pivot: A Tale of Two Diverging Business Units

Evotec's 2025 results reveal a stark internal split: biologics revenue surges 40% while core discovery unit falls into loss, prompting a major 'Horizon' restructuring plan.

The latest financial results from Evotec paint a picture of a company navigating starkly different realities within its own operations. While one division thrives on the booming biologics market, another faces significant headwinds, prompting a major new corporate overhaul.

A Divergence in Performance

The company's 2025 figures highlight this internal split with clarity. Revenue from the core Drug Discovery & Preclinical Development segment fell by 13% to approximately €529 million. This division recorded a negative adjusted EBITDA of -€12 million, moving into a loss-making position. In sharp contrast, the biologics subsidiary, Just – Evotec Biologics, saw revenue surge by roughly 40% to €259 million, contributing a positive EBITDA of about €53 million.

Market analysts point to structural challenges behind the discovery unit's struggles. Major pharmaceutical firms are reducing external spending to prioritize their internal pipelines, while broader geopolitical tensions and elevated interest rates are creating a tougher operating environment. Although Evotec's AI-driven drug design platform offers advantages, intense price competition continues to pressure margins.

The biologics arm, however, recently secured a grant from the Gates Foundation. This funding supports a three-year, ten-project initiative focused on AI-optimized monoclonal antibodies, building upon a collaboration that dates back to 2014.

The "Horizon" Restructuring Plan

On March 10, Evotec unveiled its "Horizon" program, described as the next phase of its corporate transformation. The plan involves cutting up to 800 positions, equating to nearly one-sixth of its global workforce. The company's operational footprint will be consolidated from 14 sites to 10, with the Munich location set to close entirely.

Management expects the Horizon initiative to deliver annualized cost savings of around €75 million by 2027. To achieve this, the company will incur approximately €100 million in cash restructuring costs spread between 2026 and 2028. The first operational benefits are anticipated in the second half of 2026.

The plan gains some credibility from the success of prior efficiency measures, which yielded over €60 million in savings—surpassing the original target of €40 million.

Market Reaction and Analyst Views

The company's guidance for 2026 disappointed investors. It forecasts group revenue between €700 million and €780 million, with adjusted EBITDA ranging from €0 to €40 million. Following this announcement, Evotec's share price dropped more than 13%, hitting a new multi-year low. The stock currently trades nearly 47% below its 52-week high from May 2025.

Analyst opinions on the path forward are divided. Deutsche Bank analyst Fynn Scherzler reduced his price target from €6.00 to €4.50, maintaining a "Hold" rating. He views the medium-term targets as ambitious and highlights the company's dependence on a stronger second half in 2026. RBC analyst Charles Weston remains more optimistic, keeping an "Outperform" rating and a €10.00 price target, though he expressed disappointment with the weak 2026 operational earnings guidance. The average price target among nine analysts surveyed by Bloomberg stands at €7.20, representing a potential upside of over 60% from the current price.

Looking to the medium term, Evotec aims for group revenues exceeding one billion euros, targeting a compound annual growth rate (CAGR) of 8% to 12% and an adjusted EBITDA margin of 20% by 2028. The company will release its final audited 2025 results on April 8, providing an early indicator of whether the Horizon strategy can indeed mark a strategic turning point.