Goldman Sachs Reveals 8.75% Evotec Stake as Restructuring Losses Pile Up

Goldman Sachs has emerged as a major shareholder in Evotec, just as the drug discovery group's sweeping overhaul sends first-quarter earnings deep into the red. The US investment bank disclosed a 8.75% voting rights stake in the Hamburg-based company on Monday, crossing the notification threshold on May 12 through an internal reshuffle at a subsidiary level.

The timing of the holding announcement coincides with a brutal quarter for Evotec. Revenue slumped nearly 22% year-on-year to €156.6m, missing a lucrative Sandoz licence payment that had buoyed the prior-year period and suffering from persistently weak demand in early-stage drug research. The earnings per share figure deteriorated sharply to minus €0.69 from minus €0.18 a year earlier.

Costs of the transformation programme Horizon are the main culprit. Evotec booked a restructuring provision of €75m, channelled predominantly into severance payments and asset write-downs. That pushed the adjusted operating result from a modest profit to a loss of almost €22m. The company aims to slim its global network to ten sites and is targeting annual cost savings by the end of 2027.

Should investors sell immediately? Or is it worth buying Evotec?

Despite the red ink, the balance sheet remains sturdy. Liquidity stands at roughly €445m, and a planned portfolio sale is set to bolster the cash pile further. Evotec expects an upfront payment of $100m from Gilead Sciences for the sale of its Tubulis stake, a transaction that is still on track.

The stock has not escaped the turmoil. It changed hands at €4.71 on Monday, up about 2% on the day but still 43% below its 52-week high of €8.32. Year to date, the shares have lost more than 15%, and they recently dipped below the psychologically important €4.58 mark. Analysts on average forecast a full-year loss of €0.67 per share.

Goldman Sachs described the notification as a voluntary group disclosure, hinting at an internal reorganisation rather than a deliberate bet on the company's turnaround. Whether the bank builds a bigger position will become clearer at the next reporting threshold of 10%.

Management, for its part, is sticking to its full-year guidance. Evotec expects an operating profit of up to €40m, with initial improvements expected in the second half. A bright spot came from the lab: a joint AI-powered drug discovery programme with Almirall delivered a new development candidate for skin diseases with unusual speed. The board continues to review the entire portfolio and capital structure for further strategic options.

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