Evotec: After Strong Investments, No-Moat Firm Benefits From CDMO Outsourcing Trends

We are initiating coverage on Evotec, a drug discovery and manufacturing organization that also develops proprietary pipeline assets for partnership opportunities with customers. We assign the firm a no-moat rating, as its recent investment for growth holds returns below its cost of capital for most of the forecast period. Our fair value estimates are EUR 14 per share and $7.60 per share, at a ratio of two American Depositary Shares to one ordinary share. At current prices, shares look fairly valued.